Housing finance companies to witness 8-10% surge in FY22

As per an ICRA report, Housing finance companies (HFCs) are expected to observe an increase of 8-10% in fiscal 2022, boosted by a surge in economic and higher demand.

On Monday, rating agency ICRA Ratings, in a report, said that in the first quarter of the current financial year, HFCs recorded no sequential increase in the on-book portfolio, as the second wave of Covid-19 affected their payments and collection efficiency (CE). The collection efficiency began bouncing back by the end of June 2021 and enhanced further in the second quarter of the fiscal year 2022.

In a report, the agency said that the strong demand in the industry, growing level of economic activity, and improving vaccination in the country is likely to result in a steady increase in disbursements and development in CE in FY22.

Its vice president and sector head (financial sector ratings) Sachin Sachdeva said that as of June 30, 2021, the overall on-book portfolio of HFCs in India is estimated at Rs 11 lakh crore with exposures across loans against property (LAP), home loans (HLs), construction finance (CF), and lease rental discounting (LRD).

The Covid-19-induced disruptions reduced the portfolio increase to 6% in FY21. But, despite no sequential increase in Q1 FY2022, the aforementioned favourable factors render hope for better increase prospects in FY2022 with an evaluated growth rate of 8-10%.

The report said that the HFCs asset quality metrics declined quite sharply in Q1 FY2022 due to the localised lockdowns inflicted by several states or union territories (UTs) on account of the second wave, which affected the borrowers' cash flows and thus the collection efficiency. The hike in overdue was the sharpest in the recent past, as borrower level liquidity got extended in the absence of loan moratorium, it said.

As of June 30, 2021, the gross non-performing assets (GNPAs) of HFCs rose to 3.6% from 2.9% as of March 31, 2021 (2.3% as of March 31, 2020). Though asset quality decreased across sectors, construction finance was the worst impacted followed by LAP and HL, the agency said. It anticipates a 40-70 basis points surge (net of recoveries and write-offs) in the GNPAs by March 31, 2022, from GNPAs as of March 31, 2021, considering there are no further Covid-19 induced lockdowns.

Notwithstanding the enhancement in business in the rest of FY22, the persisting asset quality pressures would keep the credit prices advanced and consequently, the profitability subdued in FY2022 for HFCs, Sachdeva said. He anticipates the pre-tax return on average managed assets for FY2022 to likely remain related to the financial year 2021 level (1.9-2%).

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