Loan against property growth drops to 10-year low in FY17: Report
The loan against property (LAP) segment has witnessed the lowest growth in almost a decade at 14% in financial year 2016-17 as lenders turning cautious towards this segment, according to rating agency ICRA. The segment had witnessed 40% and 30% growth rates in FY15 and FY16, respectively.
The LAP portfolio for housing finance companies (HFCs) and non-banking financial companies (NBFCs) grew at a compounded annual growth rate (CAGR) of around 42% during the period FY 2008-09 to FY 2016-17.
Loan disbursements reduced by 4% in FY17, after growing by 36% and 43% in FY16 and FY15, respectively.
“Lenders have turned cautious about lending to this segment on rise in deliquencies. Demonetisation also played its role in flattish disbursement in FY17,” said Vibhor Mittal, analyst, ICRA.
Lending rate has also been gradually decreasing from around 14% in FY13 to around 12% in FY17.
Loans against residential properties continue to form a dominant part of lenders’ portfolio with around 56% share, followed by loans against commercial properties with around 37% share. Mixed usage properties account for around 3.5% share, while industrial properties comprise around 3.5% share.
The prepayment rate, as a percentage of opening book size, witnessed in LAP portfolio of the financiers has come down from a peak level of 34% per annum in the December quarter of FY12 to a level of around 13% per annum in the March quarter of FY17.
Lenders are increasingly unable to offer rates attractive enough for balance transfer due to already competitive rates on existing loans. The other key factor contributing to a lower prepayment rate is the drop in the share of loans sourced by direct sales agents, according to ICRA.