Mumbai: 

Up for grabs: Dena Bank will auction a second floor flat in Krishna Villa, Santacruz

As housing loan defaulters rise in direct proportion to the hike in home interest rates, an increasing number of apartments across Mumbai and much of India have come under the hammer. When flat buyers default on EMIs for three consecutive months, and after a further grace period of 60 days, if the buyer still cannot pay up, the flat comes up for auction.

This is the moment, flat owners everywhere wait for because these flats are generally available at rates lower than the market price.

Here's what CRISIL, a credit rating agency, said in its report on Thursday.

The report stated that gross Non-Performing Assets (NPA), in this case, flat defaulters, has increased from 2.2 per cent in 2006-07 to an expected rise of 2.7 per cent in 2008-09. In value terms, this approximately means flats worth Rs 7,000 crore available in the market now and will increase to approximately flats worth Rs 8,000 crore next year. And it's only in the last one month that the flats have been available for auction.

Advocate M V Kini, who handles cases related to banking, explains that banks have been posting notices in newspapers on flat auctions every single day over the past one month. "I handle auction cases and on most days, the number reaches two digits. In the next few months, thousands of homes will be available in the city and the suburbs," said Kini.

ICICI Bank recently advertised for 1,000 flats on auction in Ahmednagar and other districts in Maharashtra. Dena Bank and Indian Bank have posted similar advertisements for Mumbai and its suburbs too.

Tarun Bhatia, Head, Financial Sector Ratings said in the report, "NPAs (flat defaulters) are on the rise. The
percentage is expected to increase to 4 per cent from the current 2.7 per cent in the retail market. The market is capable of absorbing the shock of rising NPAs, but the lenders (banks) who are heavy on unsecured loans and on high-risk customers will suffer significant losses."

According to a spokesperson from a multi-national bank, the number of NPAs have increased in every bank.
"Inflation, rise in interest rates and affordability are the main reason behind the defaults," said the spokesperson.