Delinquency 30 day plus dues for affordable housing finance companies (AHFCs) increased to 7.2% in June, up from 5.1% in March, as a result of the second wave of the Covid-19 pandemic. The asset quality had already deteriorated following the first wave of the pandemic in 2020, according to rating agency, Investment Information and Credit Rating Agency of India Limited (ICRA). Collections for these housing finance companies (HFCs) were hampered in the first quarter of the fiscal year 2021-22 due to stricter lockdowns in various states. In addition, unlike the bucket movement moratorium and restrictions that were available in Q1 of FY21, there were no such exemptions this time around. In March 2020, the 30 day plus dues were at 3.2%. In Q1FY22, delinquencies in 90 day plus dues remained under control, which is the threshold for treating loans as non-performing assets (NPAs). NPAs increased slightly in June to 1.6%, up from 1.3% in March. According to ICRA, AHFCs have strengthened their balance sheets over the last two fiscal years by increasing provision covers (including management overlays for Covid) across various buckets. In addition, overall portfolio restructuring has been limited (mostly less than 2%) across players. Given the secured nature of loans, the ultimate losses to lenders may be limited. For these businesses, write-offs have historically been low (average of 0.5% of assets over 2016-17 to FY21). As per ICRA, the total loan book of new players in the affordable housing space increased 10% year on year to Rs 60,468 crore as of June 30, citing the growth pattern of AHFCs. This is a much slower rate of expansion than the previous five-year average of 24%. It represents about 5% of the total HFC loan book of this size. The long-term growth outlook for affordable housing credit remains positive, thanks to a favourable demographic profile, an underserved market, tax breaks, and the government's push for Housing for All. ICRA added that access to adequate funding would be critical for these AHFCs to scale up. Image Source Also read: Easy finance is the key to the success of affordable housing in India