By Saikat Das, ET Bureau | Updated: Dec 26, 2016, 09.16 AM IST | Economic Times
MUMBAI: Housing finance firms downplayed stress in the real estate sector as fallout of the sudden demonetisation early last month in meetings with regulator National Housing Bank, but fear consumer sentiment expects prices to fall, and that could hamper home sales in the coming months, crimping growth, multiple sources familiar with the matter told ET.
In the past two weeks, NHB has held three meetings in Delhi, Mumbai and Chennai with 81 housing finance companies to assess the impact of demonetisation.”We have held regional level conferences of housing finance companies (HFC) assessing the situation in light of demonetisation,” Sriram Kalyanaraman, CEO of NHB, told ET. “We also discussed the challenges and opportunities in this sector and also how the HFCs can work more towards fulfilling the Housing-for-All goal (by 2022).”
Kalyanaraman did not elaborate on the challenges but some participants said they drew the regulator’s attention to escalating consumer expectations on falling prices. Rental yield and mortgage loan yields have fallen to about 3.4% (tax adjusted), which could be a key trigger to rake up housing demand from home buyers living in rented accommodation now, a head of a large HFC said.
Many consumers are holding back their decision as they expect sharp fall in prices.This could hurt home loan demand, they said, seeking NHB’s intervention to scotch such speculation. The regulator believes that there could be some short term corrections (10-15%) in home prices but it would eventually rise when genuine tax payers line up for transparent deals.
The regulator encouraged HFCs to promote small value affordable housing finance loans to coax salaried people being keen on buying homes. “We do expect a surge in affordable housing both on supply and financing side,” said Kalyanaraman, thanks to falling interest rates, higher transparency with RERA (Real Estate Regulation Act) and expected lower land prices.
Indian Housing Finance Companies (HFCs) need to work on underwriting standards for affordable home loans to control credit risks, according to Moody’s
Abhijit Lele | Mumbai | July 26, 2016 Last Updated at 00:21 IST | Business Standard
Indian Housing Finance Companies (HFCs) need to work on underwriting standards for affordable home loans to control credit risks, according to Moody’s. The observation becomes crucial, at a time when the government is pushing for an increase in home ownership among underprivileged groups.
Affordable housing loans — which are mortgages for low-income earners — are typically opted for by first-time home buyers, usually self-employed in small unregistered enterprises or working for small companies. Key credit considerations for HFCs while giving such loans include income assessments.
Some HFCs prefer to extend loans to the specific building projects of construction firms that they have pre-approved, Moody’s said.
The affordable housing loan market is forecast to grow to Rs 8 lakh crore by 2022 from Rs 59,300 crore in March 2015, bolstered by government measures. Affordable housing loans accounted for 14 per cent of the total home loan books of HFCs as on 31 March 2015. “This segment presents unique credit risks for lenders, and when securitised, for residential mortgage-backed securities because of the nature of the borrowers,” said Georgina Lee, assistant vice-president at Moody’s.
Many borrowers do not have previous banking transaction records and, for the self-employed, they do not disclose their incomes or file tax returns.
As such, the formal documentation or records needed to verify income and the ability to service loans is absent, similar in some ways to “low-doc” mortgage loans in other jurisdictions.
Source : http://goo.gl/kknWaV
MUMBAI | BUREAU | Published on July 5, 2016 | Hindu Business Line
If a builder delays delivering on the housing project or does not deliver at all, then the home loan becomes an albatross around the home buyers’ neck. Says if much of the loan is released upfront, builders may use the funds to repay old high-cost loans and for other projects
Fearing diversion of funds by builders under ‘innovative’ financing schemes — ‘10:80:10’ and ‘5:90:5’ — offered to home buyers, the National Housing Bank has warned housing finance companies against making upfront loan disbursals without linking the same to the stages of construction of housing projects or else they could attract penal provisions.
National Housing Bank (NHB), the regulator of housing finance companies (HFCs), said it has come to its notice that some HFCs are making such upfront disbursals.
Some HFCs have also approved certain projects for the advance disbursement facility.
What has caught the regulator’s eye is that some builders are actually taking advantage of these schemes to source funds at low interest rates at the expense of the home buyer. The fear is that these funds could either be used to repay old high-cost loans or get diverted to other projects.
Now, if a builder delays delivering on the housing project or does not deliver at all, then the home loan becomes an albatross around the home buyers’ neck.
How the scheme works
Once a builder gets a housing project and financing scheme approved by an HFC, the home buyer is lured with sales pitch that he needs to only come up with 5 or 10 per cent of the value of the house as his own equity.
The buyer gets a loan for 90 or 80 per cent of the value of the house from the HFC. And the balance 5 or 10 per cent own equity can be brought in by the buyer on completion of the project.
The builder promises to service the equated monthly instalment on the loan that is disbursed upfront by the HFC till the buyer gets possession of his house. Now, for the builder this arrangement is beneficial as he gets funds at home loan rates, of 9.40 per cent to 11.75 per cent.
In sharp contrast, if the builder were to approach a bank or an HFC for a loan for a residential project, he would be charged 15-16 per cent. If he taps the informal sources, the interest rate would be double what is charged by banks and HFCs.
NHB is worried that if the builder diverts the funds into other projects/repays old loans and delays the existing project, then the home loan borrower could get into trouble and this could have repercussions for HFCs.
The housing finance regulator, in a circular to HFCs, emphasised that disbursal of housing loans should be strictly linked to the stages of construction and no upfront disbursal should be made in case of incomplete/un-constructed projects.
NHB said the prevalent (financing) scheme(s) of HFCs, if any, need to be reviewed in order to remove inappropriateness of funding exposure with concomitant risk of diversion of funds.
The regulator warned that any non-compliance in this regard will be viewed seriously and may attract penal provisions.
Source : http://goo.gl/PTZrPB
By Shilpy Sinha, ET Bureau | 26 Oct, 2015, 07.17AM IST | Economic Times
MUMBAI: The National Housing Bank is considering allowing lenders to levy pre-payment penalty on housing loan customers who transfer the outstanding amount to another lender in the first two years of the loan tenure, a dampener for borrowers wanting to make the most of falling interest rates.
Sriram Kalyanaraman, chairman of National Housing Bank, the regulator for housing finance companies (HFCs), believes that home loan ‘shopping’ could lead to risks building up in the system as banks and HFCs are vying for the same customers to expand their market share.
“I think there should be some form of lock-in for the customers in the initial days, say 18 to 24 months, before they are allowed to transfer loans,” said Kalyanaraman. “Companies/HFCs/banks are trying to woo customers with lower interest rates, which is good for customers, but there could be a bubble due to everyone concentrating on the same segment and also topping up loans when they do balance transfer.”
In October 2011, NHB had waived off prepayment penalty on money borrowed from housing finance companies on floating rate. So, borrowers could prepay the loan by borrowing from a bank or a nonbanking finance company while moving to lower interest rates.
The following year, the Reserve Bank of India barred banks from levying foreclosure charges, or pre-payment penalties, on home loans with floating interest rates. In 2014, the RBI asked banks not to levy pre-payment penalties or foreclosure charges on all floating rate term loans sanctioned to individual borrowers.
Other than housing, floating loan products include corporate, vehicle and personal loans. Earlier, banks were charging pre-payment penalty of up to 2 per cent of the outstanding loan amount.
Banks, HFCs and non-banking finance companies try to woo customers with lower interest rates. As loan demand from corporates is yet to pick up, lenders are focusing on their retail portfolio, especially home loans, which is more secured lending.
The housing loan market continues to be dominated by the five large groups — SBI Group, HDFC Group, LIC Housing Finance, ICICI Group and Axis Bank. Together they accounted for 60 per cent of the total housing credit in India on December 31, 2014. Since then, a number of new HFCs have emerged in niche segments like affordable housing and self-employed customer segments, growing at more than 50 per cent and slowly gaining market share, according to recent report by rating company Icra.
With competition intensifying, lenders have dropped rates after the recent policy action by the RBI. SBI had recently cut its base rate by 40 bps but raised spreads on home loans so borrowers can look for loans at 9.55 per cent. HDFC, which prices home loans over a retail prime lending rate, had reduced rates by 25 basis points to 9.65 per cent.
The RBI has cut the repo rate by 125 basis points since January this year, while banks have reduced base lending rates by 50 basis points.
The Icra report said the government’s focus on affordable housing and favourable regulations could push overall housing credit growth to 20-22 per cent from financial year 2015-16.
Source : http://goo.gl/4p5R96
The National Housing Bank (NHB) has granted permission to six new entities to become housing finance companies.
By: PTI | New Delhi | October 10, 2015 6:43 PM | Financial Express
The National Housing Bank (NHB) has granted permission to six new entities to become housing finance companies.
These six companies are Supreme Housing Finance, Nivara Home Finance, Khush Housing Finance Private, Bajaj Housing Finance Capri, Global Housing Finance Pvt Ltd and Hinduja Housing Finance Ltd, NHB said in a release today.
“Thus, as on date, the total number of HFCs registered with NHB is 72. New HFCs aim to focus mainly on the affordable housing finance segment and are likely to cater the housing loan needs of the EWS/LIG segment, contributing to achieving the goal of housing for all by 2022,” it said.
Earlier this week, RBI allowed banks to give home loans up to 90 per cent of the value of the property that cost below Rs 30 lakh.
Earlier, the facility was available only in cases where the cost was up to Rs 20 lakh.
This will benefit those who plan to purchase properties in the range of Rs 20-30 lakh.
Following RBI’s notification, NHB too lowered loan-to-value ratio for affordable housing loans to 90 per cent.
No housing finance company should grant housing loans to individuals up to Rs 30 lakh with LTV ratio exceeding 90 per cent, NHB said.
For loans above Rs 30 lakh and up to Rs 75 lakh, LTV ratio cannot exceed 80 per cent, it said.
Source : http://goo.gl/67h10B