Demonetisation, GST effects: Default surge in affordable housing temporary

LTV ratios are regulated in India by National Housing Board, which means that no loan can cover less than 50% or more than 90% of asset value

The affordable housing segment is witnessing rising defaults as demonetisation and the introduction of the goods and services tax (GST) have affected the underlying borrowers’ cash flow over the past year, according to analysts and housing finance companies (HFCs). They, however, add that the “temporary” phase will pass soon and the segment will reach its growth potential. 

International credit rating agency Moody’s and its Indian subsidiary, ICRA, said in a recent report that the average gross non-performing assets (GNPAs) in the affordable housing segment rose to 1.8 per cent in September 2017 from 1.4 per cent in March 2017. The