Even as the government has provided infrastructure status to affordable housing along with other benefits in the Budget 2017-18 to push housing development in the country, ICRA on Tuesday revised its home loan growth target downwards by 2 percentage points from its earlier projection of 18-20 per cent to 16-18 per cent now.
According to a report released by ICRA, the total housing credit outstanding in India in September 2016 witnessed an 18 per cent year-on-year growth and stood at Rs 13.3 lakh crore. It grew 19 per cent in March 2016 when it stood at Rs 12.4 lakh crore.
“Following demonetisation, the growth in home loans in FY17 is likely to be lower at 16-18 per cent from ICRA’s earlier expectations of 18-20 per cent. The growth could be impacted by buyers and investors deferring their home purchase decisions in expectation of a decline in real estate prices. Demand from the self-employed segment is also likely to be subdued as their business volumes may have been impacted,” said ICRA. It further said that the extent of bounce back in the borrowers’ businesses would be the key determinant for the near to medium term demand from the self-employed segment.
This decline in growth has been projected despite the interest rate on housing loans coming down from around 10 per cent to 8.6 per cent in two years. Banking experts say that the interest rate in the economy is likely to remain at a lower level as banks have received large amount of low-cost funds during the demonetisation phase and also recent government announcements will widen the scope of such projects. “Additional benefits made available to affordable housing projects will not only reduce the cost of the development of such projects but will also widen the scope of demand,” said an official with a housing finance company.
Latest data from the Reserve Bank of India (RBI) show that the credit demand for housing (accounting for more than 50 per cent of personal loan outstanding) from the banking sector slipped to 14.8 per cent in December, down from 18.6 per cent in November 2015 and 19.3 per cent in December 2015.
While there has been a decline in bank credit demand from the housing sector, the demand from the infrastructure sector has hit a low as it contracted by 6.6 per cent and 7.7 per cent in November 2016 and December 2016 respectively. While the credit growth for the power sector contracted by 10.8 per cent, the credit growth outstanding for road development slowed to 0.3 per cent in December from a healthy growth rate of around 8 per cent in June to September quarter.
The Union Budget FY’18 maintained its focus on the agenda ‘Housing for All’ by 2022 with 39 per cent higher allocations vis-a-vis FY17 under the Pradhan Mantri Awas Yojana (PMAY).
“While growth in the prime home loan segment could witness moderation, affordable housing segment is likely to grow at a faster pace than industry with efforts being made to address the supply, demand and affordability issues,” said Rohit Inamdar, group head financial sector ratings ICRA.
He, however, stated that post-demonetisation, the delinquencies in the affordable housing and self-employed segments may increase as borrowers’ rely on cash transactions. He said that the gross NPAs for HFCs is likely to remain range bound between 0.9 per cent and 1.3 per cent over the medium term.