There has been a spurt in the share of loans offered by housing finance companies (HFCs) to non individuals. This trend can lead to higher non performing assets (NPAs) according to CARE.
Non individual home loans include loans such as loans against property, builder loans and lease rental discounting. Their figure has increased drastically high in the books of HFCs for the last 3 years, which has raised doubts about the asset quality, according to CARE Managing Director and CEO D R Dogra.
Dogra said, “This is an alarming trend as such loans tend to turn bad compared to those given to individuals. Individuals, who borrow to buy their own houses are less likely to default compared to non-individuals”.
The increase in share of non-individual home loans went up from 23-24% at the end of FY ’07 to about 29% at the end of FY ’09.
Dogra said, “There is a clear trend emerging that the pie of non-individual housing loans is steadily becoming larger in the total loan portfolio of HFCs”.
CARE also said that till date the HFCs have not yet been affected by NPAs due to their sufficient capitalization which also caused aggressive increase of their loan portfolio.
The gross NPA levels of HFCs was about 1% and net NPA level was about 0.5% in the nine months ending December 2009, Dogra said.