State-run banks can do more for affordable housing

The Indian Mortgage Guarantee Company (IMGC)—the only of its kind in the country—has guaranteed over ₹8,700 crore in FY25, up 40 per cent over FY24. The total guarantees written by the company are at about ₹35,000 crore. IMGC aims to ramp up its portfolio five-fold to ₹1 trillion over the next few years. Mahesh Misra, managing director (MD) and chief executive officer (CEO) of IMGC, spoke with Raghu Mohan over the phone on issues facing the home loan sector. Edited excerpts:

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Can you give us a sense of the stress level in home loans?

We are starting to observe early warning signals, particularly in affordable housing. But I wouldn't necessarily classify it as stress just yet. Housing finance is dominated by banks, which account for about 70 per cent of this business, but it is the housing finance companies (HFCs) which are more involved in the affordable segment; and many of them rely on advanced analytics to monitor risks. One key observation is that individuals with higher leverage are seeing their credit bureau scores deteriorating. If someone had a score of 740 three years ago, they are now defaulting on unsecured loans, which could eventually impact the ability to repay home loans. That said, home loans generally hold a higher priority in repayment hierarchies as these are typically self-occupied homes. So, while delinquencies are slightly higher, this is mainly due to over-leveraging, especially in the self-employed segment.

Isn't it comforting that the underlying asset is appreciating, and provides a cushion?