΢ֳ齫 ICRA sees overall housing credit growth at 12-14% in FY20 - The Hindu BusinessLine

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          Our Bureau Mumbai | Updated on January 30, 2020 Published on January 30, 2020

           

           

          The on-book housing loan portfolio for housing finance companies (HFCs) and non-banking finance companies (NBFCs) grew at a significantly slower pace of 4 per cent year-on-year (y-o-y) for the period ended September 2019 (against 20 per cent y-o-y growth for the period ended September 2018) on the back of lower disbursements and higher portfolio sell-downs, according to credit rating agency ICRA.

          On the other hand, over the same period, banks increased their retail home loan portfolios by 19 per cent y-o-y (against 16 per cent y-o-y growth for the same period last year). The overall housing credit growth slowed to 13 per cent y-o-y (17 per cent y-o-y growth for the period ended September 2018), the agency said.

          Given the tough operating environment, ICRA expects the overall housing credit growth to be at 12 to 14 per cent in FY2020 (lower than the last three years’ compounded annual growth rate of 17 per cent), with banks expected to grow at a faster pace.

          Within the HFC sector, the agency assessed that the affordable housing segment is expected to grow at around 20 to 25 per cent, almost double of industry growth.

          Housing credit growth is expected to recover as the operating environment improves and, coupled with low mortgage penetration levels in the country, the long-term growth outlook for the sector remains good, the agency said.

          As per the agency’s estimates, the total housing credit outstanding stood at ₹20.2-lakh crore as on September 30, 2019, with banks having a market share of 65 per cent (increased from 62 per cent a year ago).

          However, with HFCs raising significant incremental funds through sell down of seasoned home loans, the share of individual housing loans has steadily declined to 62 per cent in the on-book portfolio mix for HFCs as on September 30, 2019 (64 per cent as on September 30, 2018).

          Manushree Saggar, Vice President and Sector Head, Financial Sector Ratings, ICRA said: “The overall gross non-performing assets (stage 3 assets) increased to 1.9 per cent as on September 30, 2019 (1.6 per cent as on March 31, 2019), driven largely by deterioration in asset quality across HFCs in the non-housing loan segment, namely Loan Against Prpoerty (LAP) and construction finance segment.

          “A higher deterioration was seen in the construction finance segment, given the tight liquidity faced by some developers with delayed projects, reduced fund availability to the developers. Tough operating environment also impacted the cash flows of LAP borrowers who are mostly self-employed in the unorganised sector.”

          Further, lower refinancing of these loans and moderation in the portfolio growth also impacted the asset quality to some extent, she added.

          While lifetime losses on secured LAP loans are partly limited by the underlying collateral and moderate loan-to-value (LTV), Saggar felt that a downward movement in the property prices could expose lenders to higher levels of credit risk.

          While underscoring that the asset quality could be under some pressure due to the challenging operating environment, ICRA cautioned that it expects under-construction properties sold by builders under subvention or buyback/assured return schemes to be more vulnerable, as some of the builders are facing a liquidity crunch and their ability to meet these obligations may be limited.

          In rating agency’s view, gross non-performing assets (stage 3) in the HFC home loan segment are likely to increase to around 1.2-1.5 per cent (of gross advances) over the medium term from the current level of 1.2 per cent. With the heightened stress in the construction finance segment, the overall GNPA for HFCs could increase to 2 to 2.2 per cent over the medium term.

          As per estimates, the overall stressed assets could be higher by 20-40 basis points if one were to include write-offs and repossessed assets (not included in NPA) as well as written-off non-performing assets, ICRA said.

          Published on January 30, 2020

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