30% Of Home Loans In FY18 Granted To Self-Employed: Report

Reports by sector experts show, people are still sitting on their plans of buying property despite the fact that interest rates have been at a record low so far. Since the salaried class remained significantly averse to the idea, self-employed people are out claiming a larger share of the home loan pie, says rating agency Crisil. According to a report by the agency, self-employed people accounted for 30 per cent of the borrower base in the financial year 2017-18, as against 20 per cent in the previous year.

However, there has also been a rise in bad loans that were issued to this segment. Gross non-performing assets have gone up by 40-basis points to 1.1 per cent by the end of 2018 from 0.7 per cent earlier. In comparison, NPAs to the salaried-class has been low at 0.6 per cent during the same period.

Tapping the untapped

Self-employed people turn to HFCs as the documentation process is easy and less strict. Interest charged by these players, however, is often higher as rates are linked to prime lending rates.

While banks may have been cautious to roll out loans to self-employed borrowers as they perceive them to be risky, housing finance companies (HFCs) and non-banking finance companies (NBFCs) are breaking into this un-catered segment. They are also more willing than banks to extend funds to real estate developers at a time when loan defaults from this segment has been on the rise.

According to a recent report by Ambit Capital, NBFCs to exposure to the sector has been consistently rising.

"While banks have been reducing their exposure, NBFCs have significantly increased their exposure to the realty sector backed by benign liquidity and interest rate environment of late. Seasoning and tenure of loans, city- and developer-wise exposures, and yields on loans show NBFCs/HFCs have significantly riskier real estate loan books than banks," the report said.