Delinquencies marginally higher in informal, self-employed segment and loans with over 75% LTV: IMGC MD & CEO

Mahesh Misra MD CEO IMGC

India Mortgage Guarantee Corporation is one of the early movers in the mortgages guarantee industry and is promoted by US’s leading mortgage insurance provider Enact and global PE major Brookfield. With a guarantee book of Rs 35,000 crore, Mahesh Misra, MD & CEO, IMGC says it placed the company on par with some of the top five housing finance companies in India. In this interview to Moneycontrol, Misra spells out some issues which are hampering the efficiencies of mortgage lenders, such as a above normal huddle for loan to value and concentration in the top 6 cities of the country. Edited excerpts:

What is your reading of the market right now? How are you seeing the space evolve?

We continue to see strong growth in the housing sector—still comfortably in double digits. There is significant headroom for expansion, given that India’s housing finance-to-GDP ratio is currently only around 11–12%. Housing finance remains a systemic priority. It is also the second-largest employment generator after agriculture.  There are a couple of call-outs that I think are making the industry a little less efficient than it should be.

First, about 50% of all housing purchases are still happening in the top six cities and therefore housing demand and consequently housing finance remain concentrated. Second, the top 5 lending players are nearly 65% of the market. Third, I don't think lending institutions are lending enough; they are far more conservative than they need to be. Despite the increased creditworthiness of borrowers, the average loan-to-value (LTV) ratio at an aggregate level is still just about 65%.

This conservatism isn’t just unproductive, it’s inefficient. It ends up locking in the homebuyer’s capital unnecessarily. While earlier this may have been driven by cultural caution around borrowing. Now it seems more like a deliberate underwriting strategy.

Would you call this lazy underwriting in some way?

I’d prefer to call it convenient underwriting. Whenever there’s even a hint of perceived risk, the default approach to mitigation is to apply a haircut on the loan amount. That’s become the surest and easiest form of risk management. For instance, while the regulator permits LTV ratios of up to 90% for home loans below Rs 30 lakh, only about 8% of the loans in our portfolio actually make use of this limit. Certain affordable housing finance companies have adopted an unwritten rule: cap the LTV at 5% below the regulatory threshold. Even when they’re allowed to lend up to 90%, they stick to 85%.

The persistent use of LTV haircuts as a blanket risk mitigation tool continues to hold back lending potential.

At present, we’re seeing several players scaling up in the Rs 300–500 crore monthly disbursal range. But the Rs 1,500–2,000 crore per month opportunity in affordable housing is still waiting to be tapped. Maybe we’ll start seeing players reaching that level over the next 2 – 3 years.

From a risk perspective, where do you see an accumulation happening?

Delinquencies are marginally higher in the informal, self-employed borrower segment. It’s not yet alarming, but there’s a visible upward trend that we’re monitoring closely.

Loans with loan-to-value (LTV) ratios above 75% are showing slightly elevated delinquency levels. These aren’t cause for immediate concern, but they do point to where risk is gradually accumulating.

Geographically, we haven’t seen any consistent or significant regional risk trends emerge. However, there have been some isolated micro-market episodes.

At IMGC, what is your growth outlook over the next three years?

We’ve already guaranteed close to Rs 35,000 crore in home loans—backing over 1.5 lakh homeowners across more than 400 locations nationwide, with the trust of over 25 lending institutions, including banks and housing finance companies. That places us on par with some of the top five housing finance companies in the country. Looking ahead, we are confident of maintaining 40% CAGR over the next 3 – 4 years. Many lenders are now expanding into slightly higher-risk segments, and in doing so, they’re looking for structured credit enhancement solutions. That aligns well with our proposition. We expect to cross the ₹1 lakh crore guarantee mark within the next 3 – 5 years. Lenders are increasingly looking to design products specifically for the affordable housing segment.

Our core mission is to act as a catalyst in making housing more affordable in India.

Additionally, we have recently received regulatory clarification that up to 10% of our guaranteed volume can be in non-home loan categories. We have made an internal decision to offer guarantees on loan-against-property (LAP) products backed by residential collateral. We expect incremental growth to come from this new category.

How are your customers perceiving the concept of a mortgage guarantee because it is also seen as elevating the cost of doing business?

Over the last three years, one thing has become clear—recovering value through property auctions is not as easy or efficient as it used to be. On average, lenders are taking a 40% haircut when selling repossessed properties through auctions. Many properties go through multiple auction attempts. This is where our proposition has become stronger. Until about three years ago, our model was sometimes questioned because there weren’t enough loss events to showcase its value. Now we’ve seen a notable shift—our guarantees are being invoked, and we’re making good on them.

Lenders are now recognising two critical aspects. First, defaults and losses do happen, even in secured lending. Second, these losses tend to materialize only after a few years—typically in the third to fifth year post-disbursal.

Nearly 75% of all claims we have paid have been on accounts of defaults after year three. That delayed visibility of risk underscores the importance of long-term protection—and that's where our guarantee solution is proving its worth.