Defaults in affordable housing loans increases to 7.2% in June: Report

Affordable housing finance companies (AHFCs) have reported a sharp rise of 7.2% in delinquencies (30 day plus dues) for the month of June, from 5.1% in March, due to the effects of the economic disruption caused by the second wave of the Covid-19 pandemic, according to a report published on the Business Standard. The report said that in the first quarter of FY 22 (2021-22), the collection for these housing finance companies (HFCs) were impacted due to stricter lockdowns across various states.

Adding to that there were no moratorium and restrictions on movement of various asset categories this time around, unlike the first quarter of FY 21 (2020-21). Further, the asset quality had already deteriorated in the aftermath of the first wave of the pandemic in 2020. In March 2020, the 30 days plus dues were at 3.2%.

In the affordable housing space, the total loan book of new players have increased by 10% YoY to Rs 60,468 crore as on June 30, the report said referring to AHFCs growth pattern. This pace is much slower than the last five-year average of 24%. It is about 5% of the overall HFC loan book, it added. Further, for AHFCs to scale up, access to adequate funding would be critical.

Overall restructuring limited to less than 2%

On the other hand, the report said that the delinquencies in the 90-day plus dues, the threshold to treat loans as Non Performing Assets (NPAs) was under control in the first quarter of FY 22. It rose marginally to 1.6% in June from 1.3% in March.

In the last two years, AHFCs have bolstered their balance sheets with higher provision covers, across various asset categories, the report said. Adding to that, the overall restructuring on the portfolio has been limited to mostly less than 2%.