Home loans: Highest NPAs in ‘up to ₹2 lakh’ slab, says RBI study

Among all slabs, housing loans in the up to ₹2 lakh slab had the highest level of non-performing assets (NPAs), according to a RBI study.

Further, public sector banks (PSBs) reported higher NPAs than housing finance companies (HFCs) in the last two fiscal years

In the up to ₹2 lakh housing loans slab, NPAs of PSBs and HFCs collectively stood higher at 10.4 per cent in FY17 against 9.8 per cent in FY16.

In the aforementioned slab, NPAs at PSBs in FY17 were at 11.9 per cent (12 per cent in FY16) while that of HFCs were at 9.8 per cent (8.6 per cent).

NPAs were the lowest in the above ₹25 lakh slab for PSBs and HFCs put together at 0.9 per cent (0.6 per cent in FY16).

As the loan size increased, the NPAs fell, the study showed.

Responding to policy efforts, affordable housing is currently driving home loan growth in India, said Ajesh Palayi and Nalin Priyaranjan of RBI’s Department of Economic and Policy Research.

“While the total disbursement of housing loans by public sector banks as well as housing finance companies witnessed a deceleration in 2016-17, there was significant growth for the lower slabs.

“Housing loans up to ₹10 lakh recorded robust growth in 2016-17, primarily driven by the PSBs,” the study said.

In FY17, housing loans up to ₹10 lakh recorded robust growth of 23.5 per cent against 12.6 per cent in FY16.

However, there was a sharp growth in deceleration in all other housing loan slabs — in the ₹10-25 lakh slab, growth declined to 6.3 per cent (19.2 per cent) and in the above ₹25 lakh slab, growth was sharply down at 11 per cent (30.3 per cent).

While the number of beneficiaries for loan amounts up to ₹10 lakh increased sharply to 13.32 lakh in FY17 (against 9.29 lakh in FY16), the number of beneficiaries for higher-value loans (above ₹25 lakh) have, in fact, declined marginally to 8.59 lakh during the year (8.63 lakh).

The study said while the joint efforts of the government and the RBI to boost affordable housing have generated positive outcome, there are various factors affecting the pace of affordable housing development in India and restricting private sector participation, including lack of suitable low-cost land within the city limits and lengthy statutory clearance and approval processes.

The other factors that the study identified as constraining the growth of affordable housing include shortcomings in development norms, planning and project design; lack of participation of large organised real estate players due to low profit margins; high cost of funds for construction finance making the projects unviable; and challenges in beneficiary selection.

The study observed that unless these challenges are addressed, creating two crore homes may be a distant dream.

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