Not Affordable Anymore

Ryan Lau/Unsplash

Affordable housing loan companies are now facing headwinds too. 

With the average affordable home loan borrower struggling to make ends meet for the last year and a half, new loans as well as existing ones are officially declaring the dire straits as their new address.

What Is An Affordable Housing Loan?

Subsidised low interest loans that serve economically weaker sections, low income groups, SC and ST, and women who reside in the outskirts of Metros, Tier I, Tier II and Tier III cities.

Typically, affordable home loan borrowers come from a household with an annual income of INR 3 lakh to 18 lakh.

Okay, So What's Up?

Nothing. In fact, the total loan books of affordable housing finance companies(AFHCs) only grew by 10% to INR 60,468 crore as of June 30. 

This is far below the last five-year average of 24%, per Icra Ratings' latest report. 

How Come?

There are two big reasons, brought about by one big pandemic. 

First, the growth in the loan book moderated to 10% y-o-y in FY21 and Q1 FY22 due to the lockdowns, thanks to the second wave of COVID, while portfolio remained flat as on June 30, as hard hit folks weren't exactly lining up to buy new homes. 

Second, the loan EMI collections for these companies were impacted severely. Unlike the moratorium available in Q1 FY21, there were no such cushions this time.

This increased delinquencies, especially in the softer buckets (0-30, 30-60 and 60-90 days past due),  where borrowers could not pay EMIs month after month.

The Way Ahead?

"With steady improvement in collection efficiencies since June 2021, forward bucket movement is likely to be contained for most (affordable housing finance) players." 

"Though resolution/rollbacks could take longer as it would be difficult for the borrowers of these AHFCs to clear multiple instalments at the same time.", said Manushree Saggar, VP, Icra.