Home loan defaults on the rise

Defaults on housing loans are said to be on the rise, with individuals facing the brunt of the high interest rate regime. An indicator of  this is the fact that of the total security receipts (SRs) of Rs 1,100 crore issued by Asset Reconstruction Company (India) Ltd (Arcil) to banks between April-September 2008 for acquiring bad loans 20% were from home loan defaults.

Asset Reconstruction Companies (ARCs) expect a further jump in housing loan defaults in the coming quarters if interest rates do not climb down. Said Arcil, managing director & CEO, S Khasnobis: ‘‘The retail loans, mainly housing loan default, form about 20% of the total SRs of Rs 1,100 crore issued by Arcil between April-September 08. The portion of Arcil’s acquisition comprising retail loans is likely to rise given the current environment.” When an ARC acquires bad debts from a bank, based on a valuation they either pay cash or issue SRs which are held in a trust and redeemed after realisation of assets. read at times of india

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