Housing Affordability to Push Home Loan Growth: ICRA

The real estate may not be out of the woods so far, but, the government’s push on affordable housing would help it attain that goal soon enough. According to a report by rating agency ICRA, incentives to boost the residential real estate sector, especially budget housing, might push housing credit growth to 17-19 per cent in the current fiscal year.

"Growing affordability for the first-time homebuyers, supported by government incentives, like the Pradhan Mantri Awas Yojana, are expected to result in a rise in primary home purchases, especially in the affordable housing segment, which will help segmental loan growth to 17-19 per cent," the agency said in a recent report.

In the previous year, too, volume of loans to the residential segment grew significantly. It grew 16 per cent in FY18, taking the mortgage penetration (housing credit as a percentage of the gross domestic product) to a double-digit mark of 10 per cent for the first time in FY18. The growth registered in FY17 was 9.5 per cent. New players entering the affordable housing segment also helped overall housing credit grow 39 per cent in FY18.

"We expect mortgage penetration level to go up by 300-500 basis points over the next five years," the report said.

Lauding the government's move to upgrade homebuyers in the category of financial creditors in insolvency proceedings, the agency said the move would improve housing finance companies’ (HFCs) asset quality.

"The retail home loan asset quality of HFCs is likely to be benefited by the recent Cabinet decision to treat homebuyers as financial creditors," it said.

With inputs from Housing News