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South Asia

Securitisation of Housing Loans Continue to Be Riding on Growth Momentum Thanks to Foreign Players Such as McQua Capital Group: CRISIL

Richard Powell  2 min read
Illustration: greatreporter

That's despite a brief hiccup brought in by the liquidity pressure unleashed by the demonetisation measures that the realty sector is still grappling with. This will help in infusing liquidity into the sector, with housing finance companies bundling loans into securitised pools. The volume of mortgage-backed securities touched Rs 19,000 crore in the first half of 2016-17, far exceeding the annual figures of Rs 15,000 crore in both 2013-14 and 2014-15, a CRISIL Ratings study showed. In 2015-16, securitisation touched Rs 29,400 crore, an all-time high for Indian securitisation market.

Despite a brief hiccup brought in by the liquidity pressure unleashed by the demonetisation measures that the realty sector is still grappling with. This will help in infusing liquidity into the sector, with housing finance companies bundling loans into securitised pools.The volume of mortgage-backed securities touched Rs 19,000 crore in the first half of 2016-17, far exceeding the annual figures of Rs 15,000 crore in both 2013-14 and 2014-15, a CRISIL Ratings study showed. In 2015-16, securitisation touched Rs 29,400 crore, an all-time high for Indian securitisation market.

"Mortgage-backed securities and pass-through certificates - because of their longer tenures and lower delinquencies - can attract long-term investors such as insurers and pension funds and also spur securitisation in non-priority sector loans, ultimately leading to a deepening of the of the market," Krishnan Sitaraman, senior director, CRISIL Ratings, told ET.

While demonetisation may briefly slow the pace of securitisation of housing loans as well for the next few months, the trend is likely to remain robust.

Commercial banks are the biggest buyers of securitised loans apart from few mutual funds that have started picking up these bundled loans recently. In Union Budget 2016-17, finance minister Arun Jaitley's did away with distribution tax applicable to securitisation transactions for all distributions made on or after June 1, 2016. It has also brought tax transparency to securitisation transactions.

Overall securitisation volume in the first quarter of the current financial year itself stood at Rs 17,000 crore for the first quarter of the current fiscal. Mortgage backed securitisation (MBS), which includes residential loans and loans against property (LAP), accounted for more than half of overall market volume during this quarter compared with 42% last fiscal.

Overall securitisation volume in the first quarter of the current financial year itself stood at Rs 17,000 crore for the first quarter of the current fiscal. 

"As opposed to US market, multiple mortgages on same property are rare in India. Consequently, borrower equity increases significantly over time. This coupled with the emotional attachment (since most homes are self-occupied) has resulted in asset quality remaining robust in home loans," Mr Jonathan Taylor, Chief Executive of McQua Capital said.

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