Crisil warns of systemic risks in fast growing Loan Against Property market

Q: As per CRISIL, Loan Against Property are building up risk in the banking system.

Arushisha, Mumbai

3rd July 2015

Home Loan in Mumbai

housing loan

loan against property

nbfc

crisil

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That is the main reason, non-banking financial players have been at the leader of the rush in Land Against Property market, riding on their strengths of innovation, ability to offer products based on customised cash-flow assessment, and faster reversal times.

Gurmeet,

3rd July 2015

Comment

Describing on the risk, Crisil said NBFCs are offering big-ticket loans of over Rs 2 crore and the loan to value ratios have also risen, touching up to 75% the value of the security in some cases.

Abhishek,

3rd July 2015

@Abhishek,
As per the latest news, nearly a third of the Loan Against Property portfolio consist of loans with either high Long Term Value or big ticket size, including 5% that carry both the risks.

Gurmeet,

3rd July 2015

True Arushisha,
Domestic ratings agency Crisil expects that the loans against property business to grow at 22% annually during the next 4 yrs, and double to Rs 5 trillion by March 2019. But at the same time, they warned that risks are gradually building up as competition and maintaining heavy credit discipline that are crucial for sustainability of the business.

Kaushik Bardia,

3rd July 2015

Comment

Right Kaushik,
Everybody know about the Loan against Property business in which money is borrowed against an already existing property as a security, is a comparatively newer product and CRISIL said it stands at Rs 2.25 trillion today break equally between the non-banking lenders including housing finance companies and private and foreign banks. This is the only reason, the non-banking lenders grew faster at 36% while the industry grow at 30% every year.

Abhishek,

3rd July 2015