Housing Finance Companies (HFCs) went through a difficult period in the first half of FY2021 due to the factors caused by pandemic leading to a bearish phase in the real estate sector and uncertainty in the economic conditions. As a result, the industry witnessed slowdown in disbursement and moderation in portfolio growth. The outbreak of Covid-19 further impacted the collections and added to the asset quality woes. However, turnaround was witnessed in the second half of the financial year as normalcy got restored gradually. With activities resuming post September, the sales picked up and HFCs started posting healthy disbursals. The best quarter was Jan to Mar 2021 where robust disbursements were seen in excess of pre-pandemic levels. Among other factors that led to this buoyancy were the concessions extended by ways of reduction in stamp duty, lower interest regime, shift in customer preferences towards home ownership and availability of residential units at attractive price points coupled with lucrative offers from developers. The good run that continued were halted again by the second wave in April and May this year and the subsequent disruptions caused by localised lockdowns, restrictive movements. Along with disbursements collections were also hampered casting gloom once again. Nevertheless, the impact remains limited. Says Y Viswanatha Gowd, MD & CEO of LIC Housing Finance, “The impact on our collections is less due to prevailing online collection practices that were put in place immediately in the first wave which got reinforced over the past one year.Moreover, all the EMI collections are either through salary deduction or NACH mandate which gets auto debited on the due date opted by borrowers which enables a seamless online payment mode to borrowers without visiting our offices.So overall, the relative situation so far in FY2022 is comparatively better than the previous year”. Sunil Mishra, MD and CEO TRESPECT India, said, “The outbreak of the second wave has had a much milder impact on residential sales compared to the first wave. Work from home requirements and also online schooling have necessitated the need for bigger/better housing.” The optimism going forward is not without reason as the residential real estate segment bounced back impressively in Q4 FY2021 from the lowest levels witnessed in Q1 of last year. Many reputed builders including the listed ones have reported better sales.As per a recent Knight Frank India report, close to one lakh residential units were sold in the first half of 2021 (H1 CY2021) and there were almost 1.03 lakh new launches during this period. Developers also reported a lesser number of unsold inventory and price erosion too remained limited (1-2%) on a Y-o-Y basis. Pankaj Kapoor, Founder and Managing Director, Liases Foras, believes that “Post the first wave of Covid, the residential housing market in India has shown a remarkable recovery. While the recovery after the first wave was driven by the concession in stamp duty, lower interest rates, discounts, and developers' schemes, the momentum continued even during the second wave suggesting a solid undercurrent of the end-users demand. Our data shows the sales in the first half of 2021 (HI CY 21) clocked 165600 units, 25% higher than H2 CY 20 and 30% higher than HI CY 20. That too, despite no stamp duty concession being available at present. The prevalent inventory suggests that the market will continue to remain efficient, and sales will continue growing.” Further, many HFCs have reduced home loan rates which incentivised home buyers to take the plunge towards home- buying with improvement in affordability. Avers Gowd, “We have slashed our home loan interest rates substantially last year and effective 1st July 2021, we have further reduced the rates on home loans as a limited period offer. Home loan rates start from 6.66% for loans up to Rs 50 lakh depending upon the credit worthiness of borrowers as reflected by CIBIL scores. This is historically the lowest rate ever offered. Customers can get the benefit of this offer provided he avails the disbursement partially or fully till 30th September 2021.LICHF’s rates are lowest ever with a maximum tenure of 30 years. Considering the impact of the pandemic, we wanted to offer an interest rate that would help in uplifting the overall sentiments and aid more individuals to fulfil their dream of owning their own house. We hope that this reduction in home loan interest rate will further boost customer confidence and help in early revival of the sector.” Going forward, HFCs expect their loan portfolio to grow 8-10% in FY2022. From a liquidity perspective, players are maintaining healthy on-balance sheet liquidity and adequate provision cover to provide cushion for bad loans to maintain profitability. Gaining growth momentum and controlling fresh slippages will be crucial in the days ahead where the trajectory of pandemic still remains unpredictable.Managing the evolving challenging environment will be important as the threat of a third wave and consequent lockdowns remain a concern. Much will also depend on demand growth of residential units, consumer sentiments, overall economic factors, healthy job market conditions, continuation of support measures such as lower interest rates, stamp duty concessions.