NBFC home loans down 25% since 2012

Loans given out by non-banking financial companies for housing purposes dipped by 25.8 per cent between March 2012 and 2014, as per the latest RBI data. This was primarily on account of regulations aimed at containing the excessive flow of credit to the sector amid fears of asset bubbles.

Among the measures, the RBI told the NBFCs that they should not include stamp duty, registration and other documentation charges in the cost of the housing property they finance so that the effectiveness of loan-to-value (LTV) norms is not diluted.

Consequently, the home loan exposure of NBFCs dipped from ₹8,816 crore to ₹6,548 crore over the two-year period. On the other hand, commercial property lending by NBFCs surged, with the overall exposure rising more than 50 per cent to ₹29,806 in March 2014 from levels seen two years earlier. This was primarily because the risk weight prescribed for commercial lending by the RBI is equivalent to the norm for residential loans in excess of ₹75 lakh. What’s more, there is no stipulated loan-to-value requirement, though provisioning requirements are slightly higher, giving a fillip to commercial lending over loans to individuals.

There’s no cause for worry though: the exposure of Indian non-banking financial companies to the real estate sector is just around 4.1 per cent of their total assets, according to the RBI. This marks a return to 2011-12 levels, when their exposure to real estate stood at 4 per cent of assets and is up from the 3.6 per cent level at the end of 2012-13 financial year.

Of the total exposure of ₹59,039 crore, the bulk comprised loans to commercial properties and developers, followed by mortgages other than individual housing loans and commercial land and building developers.

Housing loans made up just 11.1 per cent of the total loans and constituted less than 0.5 per cent of total exposure, compared to 2.1 per cent in the case of commercial property and developers and 1 per cent on mortgages. Their investments in real estate amounted to a meagre ₹3 crore.

The NBFCs’ direct exposure to real estate under “other” heads was limited, as was their indirect exposure, at just 0.10 per cent of total exposure.

Notably, as per National Housing Board data, only a few NBFCs are reported to have relatively high exposure to real estate.

The number of such NBFCs with exposure of more than 40 per cent of their assets stands at around 14. There are 60 NBFCs registered with the National Housing Board as housing finance companies.