With demand for housing loans picking up during the last two quarters of fiscal 2020-21, housing finance companies (HFCs) are likely to witness a growth rate of 6-8 per cent during the year and 8-10 per cent in FY2021-22, says a report.
The on-book portfolio growth moderated for HFCs in the first nine months of FY2021 (compared to March 2020) to 4.3 per cent (excluding the portfolio of one large player, which had sizeable write-offs) from portfolio growth of 6 per cent (Y-o-Y) in FY2020. Icra Ratings in a report said with revival in demand for housing credit in the industry in the last two quarters, most of the HFCs have already reached near pre-Covid level disbursements and are targeting to achieve further higher disbursements in Q4 FY2021.
"This is expected to push up the growth rate for FY2021 to 6-8 per cent. Thereafter, we estimate the growth of 8-10 per cent for on-book portfolio of HFCs in FY2022," the agency said.
According to Icra's vice president and sector head Sachin Sachdeva, given the cash flow stress faced by the borrowers, the overdues of HFCs have increased in the first nine months of FY2021 as reflected by proforma GNPAs of around 2.7 per cent as on December 31, 2020 as compared to reported GNPA of 2.4 per cent as on March 31, 2020.
The asset quality indicators could be further impacted in Q4 FY2021, he said.
He sees GNPAs of HFCs for FY2021 to be higher by 50-100 basis points, compared to FY2020, and the same to remain elevated in FY2022 as well.
Notwithstanding the improvement in business in the last two quarters of FY2021, relatively lower business growth than the earlier years, and asset quality pressures would moderate the profitability for the HFCs in FY2021, Sachdeva said.
However, healthy provision cover maintained by most of the entities is expected to provide cushion and protect the profitability from Covid related asset quality stress in FY2022, he said.
"While HFCs are expected to regain their profitability and growth trajectory in FY2022, the rising Covid-19 infections and localised lockdowns remain a concern area. HFC's ability to maintain the growth momentum and keep slippages under control would be critical for maintaining the credit profile," he added.
Further, the report said HFCs have been maintaining healthy on-balance sheet liquidity for the last few quarters and have gradually reduced their reliance on short-term funding sources like CP (commercial papers), which has helped improve asset liability mismatches in the near-term buckets.
The rating agency expects HFCs to maintain healthy liquidity in the near-term given the challenging environment.
