Affordability of home buyers has improved from 3.8 times to 2.7 times the annual salary of the buyer.
Delinquencies in the affordable housing segment are largely in loans up to Rs 2 lakh and will force lenders to improve their underwriting towards such loans.
However, even though home loan rates are rising, the affordability of home buyers has improved from 3.8 times the annual salary of the buyer to 2.7 times, says Ashwini Kumar Hooda, deputy managing director, Indiabulls Housing Finance.
In an interview with Moneycontrol, Hooda said that the mid to premium housing segment sales will pick up in the next 12-18 months.
Edited excerpts:
related news
Q: What are your views on interest rates, they are on a rise?
A: Yes, interest rates are rising but won’t stay high for long and it was an aberration in bonds because banks who were natural buyers did not buy bonds and hence rates went in just one direction.
It is good news that RBI feels inflation is not such a big problem and that gives confidence in our borrowing programme. Oil has been factored in at USD 68 per barrel and it can surprise us on the downside, monsoon is likely to be normal. MSP is a concern but we will have to wait and watch its inflationary impact. So there are potential inflation reading items but largely we will meet what RBI has estimated.
Q: Affordable housing has taken centrestage for most financiers. But we have also seen some delinquencies rising. How is the segment doing?
A: Affordable housing continues to do well with a 30 percent compounded annual growth rate (CAGR). There is a large segment of people buying their first homes. The issue on delinquencies is on the lower ticket size loans. Loans up to Rs 2 lakh, the default rate is about 12 percent, between Rs 2-5 lakh the default rate is 6 percent and above Rs 10-25 lakh, the delinquency rate is very low at 0.6 percent, down from 0.7 percent.
We are largely between Rs 15-35 lakh participants and our delinquencies have been stable at around 25-28 basis points. That is a white collar worker with stable earnings. The entry level segment has seen some jump in the delinquencies because this is the first time some financier is underwriting a Rs 2 lakh loan. My sense is lenders will get more selective in lending to this segment. They must not fund those properties where titles are not clear, term planning sanctions are through, etc.
Q: How has demand changed in the home loan segment after the Pradhan Mantri Awas Yojana scheme?
A: People don’t buy houses because of a subsidy, but what used to be 30-35 percent growth is now 35-40 percent. This is because affordability has increased, salaries are increasing, property prices have also stagnated, etc. The affordability has increased 2.7 times their annual salaries, which used to be 3.8 times earlier.
Q: How has RERA and demonetisation changed for the real estate sector?
A: Builders are now contributing to new supplies post some disturbance following the RERA implementation. Demonetisation only postponed new launches, but not much changed in the affordable housing and premium segment. Once the mid-premium housing segment picks up, we will see average ticket size moving up. It has started, but should start selling in the next 12-18 months.
Q: Where has your growth come from in the fourth quarter?
A: Growth is entirely from affordable housing largely from Mumbai, Pune, Hyderabad, Bengaluru. North and even Chennai continues to be slow because of the buyer confidence waning due to the impact of the likes of Amrapali and Jaypee cases. Market gets more conservative when people are buying their first homes. There is also huge demand for commercial space and robust leasing activity, which increases residential requirements in those regions.