Affordable Housing Finance Corporations Could Grow 12-15% in FY 22: Report
The long-term growth outlook for affordable housing finance companies remains positive and the segment is expected to grow 12 to 15% in the next fiscal year, according to a report.
As of September 30, 2020, the total portfolio of new affordable housing finance companies (AHFCs) in the affordable housing space stood at Rs 55,061 crore, recording moderate annual growth of 9%, Icra Ratings said in a report. .
According to the agency’s vice president and head of financial sector rating, Manushree Saggar, AHFC’s growth numbers could be well below 8-10 percent in FY2021 due to the delay in reporting. housing purchases by borrowers due to the impact of the pandemic on their income and savings.
However, the long-term growth outlook for the sector remains positive given the largely underserved market, favorable demographic profile, housing shortage and government support in the form of tax measures and subsidies. We expect growth to increase to 12-15% in fiscal 2022, Saggar said.
The report states that the asset quality indicators for AHFCs registered a marginal improvement with a reported gross NPA percentage of 3.1% as of September 30, 2020, compared to 3.6% as of March 31, 2020.
The moderation was supported by stopping the movement of compartments between March 2020 and August 2020 and adjusting the IMEs received during the moratorium period against arrears, he said.
Saggar said the reported global gross APN percentage could increase to 3.6-3.9% by the end of March 2021, from 3.1% as of September 30, 2020, and remain at similar levels over the course of fiscal year 2022 assuming growth is in line with expectations.
In the long run, however, the ultimate losses for lenders could be limited, as the secured nature of loans during the recovery period could be extended, according to the report.
These lenders strengthened their balance sheets with additional provisions related to COVID-19 and higher expected credit loss (ECL) provisions in fiscal 2020 and the first half of fiscal 2021, a-t -she adds.
The rating agency expects profitability metrics for these HFCs to be lower with a return on assets (ROA) of 2.2-2.4% in fiscal 2021, given the expected impact of the pandemic on new business as well as on the quality of assets.
In the long run, the ability of companies to improve operational efficiency and control credit costs would be imperative to improving performance metrics, Saggar added.
(Only the title and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)