Affordable housing in India is a corner of finance that’s expanding almost 40 percent a year and even more for some hyperactive lenders. The borrowers are subprime, their collateral is of dubious value, financiers’ cost of capital is rising, and yet the government is whipping up a home-buying frenzy. Housing Development Finance Corp, the country’s largest mortgage provider, says one in five of its customers is eligible as an affordable-housing borrower. HDFC’s underwriting standards are time-tested, so you can probably expect it to manage scorching growth without losing its head.
Repossessing homes of working-class people in small cities will be near impossible. And even if financiers manage to get some front-door keys, they won’t find buyers. The only “investor” for such properties is somebody trying to deploy his unaccounted-for cash. Unlike individuals, banks can’t sell homes for 60 percent payment by check and 40 percent in cash.