Affordable Housing is Covid proof Latest News

If sliding real estate prices weren't compelling enough a reason to purchase your dream home, a study by credit bureau CRIF High Mark has found that people continued to invest in affordable housing during the Covid-19 pandemic.

The study doesn't delve into the actual property sales, but analyses the housing loans raised for the year ended December 2019-20 (FY20). Around 60 percent of the sales by value and 90 percent by volume was driven by the affordable housing segment, for which less than ₹35 lakh loan each was taken, Within affordable housing loans under ticket size ₹15 lakh comprised 70 percent by volume and 38 percent by value.

A few sales also took place in the premium segment having a loan requirement of ₹75 lakh and above. Mid-segment, with a loan size of ₹35-75 lakh, was less than 10 percent in total volume, but about a quarter of the value. Housing loans grew 9.6 percent in December FY20 over December 2018-19, despite the pandemic. Growth particularly came in the third quarter (Q3) ended December. Housing loan disbursements grew 28 percent from the second quarter, compared with just 6 percent in the year-ago Q3.

CRIF said such a strong growth rate may have happened in the fourth quarter as well, with "disbursements showing tremendous growth". Growth was flat in the quarters ended March, June, and September of FY20 due to the nationwide lockdown and suspension of most business and lending activities in large parts of the country said the study.

Public sector banks (PSBS) were the largest disburser of loans, both in terms of volume and value, and dominated the affordable and mid-range segments and an increasing share in premium. The top five PSBS commanded a 30 percent share of the loan market both in volume and value. Housing finance companies and non-banking financial companies (NBFC) were "significant players across ticket segments by value and volume, though they continued to lose market share to banks in the last three years due to non-bank lenders becoming more cautious since the NBFC liquidity crisis and general consumption slowdown", said CRIF 

Growth in the affordable segment comes in more from Tier II and III geographies, while overall volumes continue to be much larger in metro cities, it observed.

The average ticket size of home loans given to millennials and young borrowers continued to increase over the past five years, with a compound annual growth rate of 6.2 percent.

Tier II and III geographies had a higher annual growth rate in the housing loan book, compared to metros, with a large part of the growth coming in from the affordable and mid-market segment. The average ticket size of private banks was the highest at ₹27.6 lakh, although year-on-year growth in average ticket size was the highest in PSBS, increasing from ₹179 lakh to 19.1 lakh as of December 2020, the study found.

Default rates were the lowest in the 45-plus age group, followed by the 26-45 age group. Default rates were the highest in the 25-below age group. Around 4.24 percent of the loans given to the youngest segment turned delinquent, whereas 2.21 percent of the loans soured for people aged between 46 and 55. Tier III and beyond geographies had higher default rates, compared to other geographies, as well as housing segments.

Source: ​​​​​​Business Standard