PMAY’s Major Hurdle, HFCs Reporting Higher NPA In Loan Segment
The government’s Pradhan Mantri Awas Yojana (PMAY) scheme faces its first major hurdle as housing finance companies (HFCs) have begun reporting higher non-performing assets (NPA) in this loan segment.
A senior vice-president at rating agency Icra, said, over the last 12 months, one is seeing delinquencies slowly build up, with the frequency rising largely on account of the impact of demonetisation and the goods and services tax affecting the underlying self-employed borrowers.
With a Budget outlay of 645 billion for 2018-19, under the PMAY-Gramin or rural-focused scheme, so far over 9.87 million homes have been registered for construction and around 3.7 million homes have been completed. On the other hand, only 8 percent of the total target of 4 million homes to be built under the PMAY-Urban scheme has been constructed as of end-March 2018.
PMAY-Gramin, which was launched in November 2016, aims to construct 10 million homes by March 31, 2019, with the private sector and state government participation. Under the PMAY-Urban scheme, launched in June 2015, the government aims to build 20 million homes by 2022.
The vice-president at Icra said that the aggregate NPA levels in the affordable housing lending segment are not industrywide, but that the new HFCs have skewed the numbers for the whole industry.
Of the total 330 billion loans disbursed solely by the new HFCs, the gross NPA s have risen from an aggregate of 1 or 2 percent to 4.5 percent as of March 2018, analysts said.
Under PMAY, households with an income of between 600,000 and 1.8 million can avail of a Credit-Linked Subsidy Scheme on their housing loan worth 4 percent (incomes above 700,000) or 3 percent (incomes above 1.4 million).
Traditional HFCs like HDFC, LIC Housing Finance, PNB Housing Finance, and Indiabulls Housing Finance continue to maintain stability in their asset quality. But the proportion of affordable housing loans as a part of their total loan book remains small.
For the big and traditional HFCs, until December the trend in delinquencies was worsening but it has stabilised at around 1 to 2 percent for March 2018.
A lot of customers are cash-salaried. When there is a bad business cycle, their salary gets affected, and delinquencies rise. HFCs should be able to assess the salaried cash flows of their customers in order to be successful in this segment.
While there is a deterioration in the asset quality for some of the new HFCs, some banks and HFCs have approached the finance ministry and the Reserve Bank of India (RBI) to allow them to lend for low-cost housing even when all approvals are not in place.
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