Affordable housing is new money spinner for HFCs

MUMBAI: What started as a political platform to gain votes — the affordable housing initiative — has become a money spinner for housing finance companies, with even big firms such as HDFC and Dewan Housing gaining nearly 20 per cent of their growth from this segment.
Under the four categories — economically weaker section (EWS), lower income group (LIG), mid-income group 1 (MIG-1) and mid income group 2 (MIG-2) — demand is coming in mostly from the last two segments. For the MIG-I category, a 4 per cent interest subsidy is provided to beneficiaries with an annual income of Rs 6-12 lakh on a loan of up to Rs 9 lakh, and 3 per cent interest subsidy for an annual income of Rs 12-18 lakh on a loan of up to Rs 12 lakh.

EWS and LIG target people with an annual income of Rs 3 lakh, and Rs 3-6 lakh, with interest subsidy of 6.5 per cent. The larger housing finance companies are focusing on the Rs 20 -40 lakh segment though.

People with income of Rs 6-12 lakh are taking loans to buy their first homes. Since loans in this segment is three times the income, loan size is Rs 18-35 lakh, corresponding to houses at Rs 25 lakh to Rs 40 lakh. “The segment that is growing is the mid-housing in some cities, and outskirts of major cities,” said Digant Haria, analyst, Antique Broking. “There’s no pick-up in the Rs 10-20 lakh segment, which was seen as the golden segment because of Rera, demonetisation and lack of supply.”

HDFC approved 37 per cent of its home loans in volume terms in the first quarter, and 19 per cent in value terms to customers from the EWS and LIG segments. HDFC on an average has been approving close to 8,300 loans on a monthly basis to EWS and LIG segments, with monthly average approvals at Rs 1,346 crore. Dewan Housing posted 28 per cent growth in home loans by focusing on the affordable housing sector as 65 per cent of its home loan customers are eligible for various government schemes. “100 per cent of my ticket size qualifies for PMAY, and 35 per cent of our borrowers are actually eligible after all the applications of the various rules of PMAY,” said Gagan Banga, VC, Indiabulls Housing Finance.