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Gujarat: Housing loan NPA at Rs 777 crore, rises 3 times in two years

Realtors shocked, presume slowdown and high inflation-led falling incomes may be hampering buyers' ability to repay home loans

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Bad loans in the housing sector in Gujarat rose by three and a half times in two years according to a banking report. Housing loans have been traditionally considered as low risk loans and the sudden rise in bad loans have puzzled local realtors. Some of them presume that this could be a result of rising inflation, slowing down of economy and subsequent reduced savings of the masses.

According to a report published by State Level Bankers Committee (SLBC) for the April-June quarter of 2018-19 fiscal, absolute Non Performing Assets (NPA) in Gujarat stood at Rs 777 crore, a rise of 116 per cent (more than double) compared to Rs 359 crore in the corresponding quarter in fiscal 2017-18. The NPA in April-June quarter in fiscal 2016-17 stood at Rs 224 crore. So the absolute NPA rose by 3.46 times in two years.

The sharp rise in NPA has shocked local realtors. Jaay Shah, National President, Confederation of Real Estate Developers of India (CREDAI), said that it is necessary to look into the details of the rise in NPA. "The housing loan segment has traditionally been very safe for bankers. If theses figures are correct, then we need to go into the details of the trend," Shah told DNA.

Paras Pandit, CMD of Sheetal Infrastructure Ltd, said he cannot trust these figures. "There isn't a single case of default in any of my projects or those that I know of. In markets like Noida, Bengaluru, or even Mumbai, prices have depreciated, so it may be beneficial for buyers to default on existing loans and buy a new house at a cheaper rate. But that has not happened in Gujarat; so the chances of default are lower in Gujarat," said Pandit.

Players in the segment also believe that unlike mature markets, the market in Gujarat is not so organised and cash continues to be an integral component of buying a house. So, if a buyer defaults, he has to incur a huge financial loss.

"If incomes are not rising commensurate to the rising prices, it is likely that home buyers won't be able to repay the loans. Moreover, a delay in refund of GST has decreased liquidity, affecting small and even large businessmen. This could have also affected their ability to repay loans," said Vijay Shah, MD of Vijay Shah Builders.

Ashish Patel, President of Gujarat Institute of Housing and Estate Developers (GIHED), also expressed a need to go into the details. "Presuming that the figures are correct, we can say that rising inflation is taking a toll on the ability of home buyers to repay loans. Economic slowdown led stagnation or fall in housing incomes seem to be the only explanation to the trend," said Patel.

STATE OF AFFAIRS

The Absolute Non Performing Assets in the state stood at Rs 777 crore, according to the report, indicating a rise of 116 per cent compared to Rs 359 crore in the corresponding quarter in fiscal 2017-18. 

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