Housing finance companies are expected to grow 8-10% in FY 22: Icra
However, collection efficiency started to rebound at the end of June 2021 and improved further in the second quarter of fiscal 2022.
“Strong demand in industry, increasing level of economic activity and increase in immunization in the country are expected to result in steady growth in disbursements and improvement of EB in fiscal year 2022,” said the agency in the report.
Its Vice President and Sector Head (Financial Sector Ratings) Sachin Sachdeva said the overall HFC portfolio in India was estimated at 11 lakh crore as of June 30, 2021, with exposures to home loans (HL), loans Against Property (LAP), Construction Financing (CF) and Discounted Rents (LRD).
COVID-19-induced disruption moderated portfolio growth to 6% in fiscal 2021
“Nonetheless, despite zero sequential growth in the first quarter of FY2022, the aforementioned favorable factors point to better growth prospects for FY2022 with an estimated growth rate of 8-10%,” Sachdeva said.
The report says HFC asset quality metrics weakened significantly in the first quarter of FY2022 due to localized lockdowns imposed by various states / Union Territories (UTs) due to Wave 2, which had an impact on the cash flow of borrowers and therefore on the efficiency of collection.
The surge in arrears was the largest in the recent past, as liquidity at the borrower level stretched in the absence of a loan moratorium, he said.
The gross non-productive assets (GNPA) of HFCs increased to 3.6% as of June 30, 2021, compared to 2.9% as of March 31, 2021 (2.3% as of March 31, 2020). Although asset quality deteriorated across all segments, construction finance was hit the hardest, followed by LAP and HL, the agency said.
He expects an increase of 40 to 70 basis points (net of recoveries and write-offs) in GNPA by March 31, 2022, compared to GNPA at March 31, 2021, assuming there is no more blockages induced by COVID-19.
“Despite improving business in the remainder of FY2022, continued pressures on asset quality would keep credit costs high and hence profitability moderate in FY 2022 for HFCs,” Sachdeva said.
He expects the pre-tax return on average assets under management (PBT percent) for FY2022 to likely remain similar to the FY2021 level (1.9-2 percent).