The default on affordable housing loans rose to a high of 7.2 percent

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MUMBAI: The impact of the economic crisis created by the Corona epidemic is now being felt in the affordable housing loan finance sector as well. For Affordable Housing Finance Companies (AHFCs), arrears of more than 90 days have risen to 6.5 per cent in June from 3.1 per cent in March. In other words, defaults are also on the rise in the affordable housing loan segment.

Rating agency Iqra said the quality of the property had deteriorated since the first wave of the epidemic in 2020. Also, the collection of housing finance companies has been severely affected by the second wave of Corona epidemic in the first quarter of the financial year and the impact of severe lockdowns in some states. Notably, there was no relief this time around as there was a long moratorium on bank loans during the first wave of the Corona epidemic last year. In March 2020, the arrears for more than 90 days were 3.7 per cent.

The classification of arrears as NPAs for a period of ninety days or more has increased overall in the first quarter of the current financial year. Such NPAs were 1.4 per cent at the end of March, rising to 1.6 per cent in June.

Over the past two financial years, housing finance companies have strengthened their balance sheets with higher provision covers in various segments, the rating agency said. Also the overall restructuring is also limited, mostly less than two per cent.

Loan compounding for housing finance companies has been historically low. The total loan book of new players in the affordable housing segment has increased by 10 per cent year-on-year to Rs 30.5 crore as on June 30. This growth rate is much lower than the average of 5% in the last five years.


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