Banks can't afford affordable housing

As affordable housing got a much needed push with the grant of infrastructure status in last year's budget, banks are seeing a rise in defaults in home loans of small ticket size.In the last two years, loans under Rs 10 lakh are the only ones which have seen a growth while growth rate of loans above Rs 25 lakh decreased by two third.

The number of people opting for loans less than Rs 10 lakh saw the maximum increase, while there was a decline in the number of people opting for loans above Rs 25 lakh.

The increase in disbursement of sub-Rs 10 lakh loans has also led to an increase in defaults, especially for loans under Rs 2 lakh. In fact, the percentage of defaults in this category is more than the combined defaults in all other loan slabs.

Public sector banks, because of the government mandate to push affordable housing, have a higher default rate in the small ticket size loan category, especially those under Rs 2 lakh, compared to housing finance companies.

The growth rate of loans under Rs 10 lakh for public sector banks is nearly twice as much as that of housing finance companies.