Affordable housing is finally a safer bet for lenders

With a higher loan growth rate of 23 per cent, over nearly the past five years and low delinquency rates of under 1 per cent, the affordable housing segment offers strong growth opportunities for lenders, says a report

A study by credit information company CIBIL, has revealed that loans meant for affordable housing (home loans of under Rs 10 lakhs ticket size), have shown a robust 23 per cent CAGR over the past five years, while the delinquency rate has been firmly under control at around 1 per cent.

In 2016, the affordable housing loan book stood at Rs 30,400 crores, extended to around 7.5 lakh borrowers. “The golden lining is that there have been low delinquency rates on affordable housing loans over the past five years. These trends indicate a very strong growth potential for lender,” the report said. The study said the average ticket size in the segment has been coming down from around Rs 4.8 lakhs in 2009-10 to nearly Rs 4.1 lakhs now, possibly suggesting the lenders’ success on the financial inclusion drive.

See also: Affordable housing to be growth driver for housing finance market

“Looking at the average ticket size, we expect to witness more and more small banks and micro-lenders getting into affordable housing lending in the coming years,” CIBIL chief operating officer, Harshala Chandorkar said. “The possible reason for the steady growth in the affordable housing loan segment, is the increase in lending towards the bottom of the pyramid. In consideration of the rise in home prices, this could be seen as a significant development indicator,” she added.

The study found that Maharashtra, Madhya Pradesh, Gujarat, Tamil Nadu and Andhra are the top five states, with the highest number of affordable home loans in the last five years, contributing around 60 per cent of the total such accounts opened. Maharashtra holds the top spot with the highest number of accounts (over 6.53 lakhs) followed by MP (5.60 lakhs), Gujarat (3.13 lakhs), TN (2.65 lakhs) and Andhra Pradesh, with 2.28 lakh such accounts.


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