International rating agency Moody’s has said securitisation is the key to solve the country’s funding issues for the longer gestation sectors like housing, infrastructure and urbanisation projects.
“While the government has injected its own capital to support various reform initiatives, securitisation could play a significant role by providing funds to finance development projects,” Moody’s Investors Service assistant vice-president Georgina Lee said in a note today.
The new government has identified housing, infrastructure and other urbanisation initiatives as the key for pushing up the sagging economic growth.
Securitisation can provide funds for real estate developers, project sponsors and retail loan providers, alleviating pressure on public finances and the banking system, she added.
Even though securitisation activity was up 29 per cent in 2013-14 at Rs 490 billion, there has been a volatility in the activity in the recent years on lack of clarity in regulation and taxation fronts, she noted.
Issues around regulation and taxation fronts directly impact the motivation levels of the originators and investors. Emergence of a broader set of investors is important for the development of the securitisation market in the country, which will in turn fund the economy.
“…the existence of a diverse range of investor types is key to a deeper, more liquid market and better price discovery,” the report said.
Till now, the market has been dominated by three asset classes, namely auto loan asset backed securities (ABS), residential mortgage backed securities (RMBS) and micro loan ABS, it said, adding the commercial mortgage backed securities market, which saw three deals in 2014, is also emerging.
The delinquencies in commercial vehicle ABS category are relatively higher for more recent vintages, owing to a stressed operating environment for transport operators, she said.
The RMBS and micro-loan ABS are among the better performing ones, it said, adding that RMBS loans from certain regions exhibit higher delinquency rates than others.