Study analyses home loan trends to find affordable housing is Covid proof

About 60% of sales by value, 90% by volume were driven by affordable segment, for which less than Rs 35 lakh of loans each were taken

Despite an ongoing pandemic, people continued buying houses, mostly the affordable ones, a study by credit bureau CRIF High Mark has found.  

The study doesn’t delve into actual property sales, but analyses the housing loans raised for the year ending December 2020.

About 60 per cent of the sales by value and 90 per cent by volume were driven by the affordable housing segment, in which less than Rs 35 lakh of loans for each unit were taken. Within affordable housing, loans under Rs 15 lakh comprised 70 per cent by volume and 38 per cent by value.

A few sales also took place in the premium segment, where the loan was Rs 75 lakh and above. Mid-segment loan size of Rs 35-75 lakh was less than 10 per cent by volume but about a quarter by value.  

The housing loans grew 9.6 per cent in Dec'20 over Dec'19 despite the pandemic. The growth particularly came in the third quarter ended December. Housing loan disbursements grew 28 per cent from the second quarter compared with just 6 per cent in the year ago third quarter. CRIF said such strong growth rate may have happened in the fourth quarter as well with “disbursements showing tremendous growth.”

Growth was flat in quarters ending Mar'20, June'20 and Sept'20 due to covid-19 pandemic and resulting nation-wide lockdown and suspending of most of the business and lending activities in large parts of the country, the study said.

Public sector banks were the largest disburser of loans, both in terms of volume and value, and dominated the affordable and mid-range segments and an increasing share in premium. The top five public sector banks commanded 30 per cent share of the loan market both in volume and value.

Housing finance companies (HFCs) and non-banking financial companies (NBFC) were “significant players across ticket segments by value and volume, though they continue to lose market share to banks in the last three years due to non-bank lenders becoming more cautious since the NBFC liquidity crisis and general consumption slowdown," CRIF said.

Growth in the affordable segment comes in more from Tier II and III geographies, while overall volumes continue to be much larger in metro cities, it said.

Average ticket size of home loans given to millennials and young borrowers continued to increase over the last five years, with a compounded annual growth rate (CAGR) of 6.2 per cent. Tier-2 and 3 geographies had a higher annual growth rate in housing loan book than metros, with a large part of the growth coming from the affordable and mid-market segment.  

The average ticket size of private banks was the highest at Rs 27.6 lakh, although Y-o-Y growth in average ticket size is highest in public sector banks increasing from Rs 17.9 Lakh to Rs 19.1 Lakh as of Dec 2020, the study found.

Default rates were lowest in the 45-plus age group followed by the 26-45-year age group. They were highest in the under-25 set. About 4.24 per cent of the loans given to the youngest segment turned delinquent, whereas 2.21 per cent soured for people aged 46-55.  

Tier-3 and beyond had higher default rates than other geographies as well as housing segments.