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Housing finance companies to see slower growth, more bad loans in FY19 - ICRA

Infra News - Published on Mon, 07 Jan 2019

Image Source: Moneycontrol
According to ratings agency ICRA, housing finance companies will see slower growth and lose market share to banks in FY19 due to tighter liquidity conditions. Also, they will need to raise INR 1.7-1.9 lakh crore in the current fiscal to meet their 15% growth target. Bad loans in HFCs are expected to increase as more finance is extended to self-employed and in the construction segment. The total of all home loans outstanding in India is estimated at INR 17.8 lakh crore as of end-September 2018 - a 17% increase over the same period in the previous year. This is an average of the 18% growth rate recorded by HFCs and 16% by banks.

One of the growth drivers in HFCs was the non-housing portfolio (includes loans to builders), which grew 29% YoY. Incidentally, loans to builders, which are around 19% of HFCs’ portfolio, have had higher levels of non-performing assets at about 2.2%.

ICRA said that while gross NPAs as on September 30, 2018 were 1.3% (1.1% as on March 31, 2018), tight liquidity and slowdown in growth could impact the asset quality in the non-housing loan segment. ICRA VP and sector head (financial sector ratings) Ms Supreeta Nijjar “Within the housing loans segment for HFCs, share of the self-employed segment has increased to 29% as of September 2018. Though larger HFCs can compete with banks in the salaried home loan segment, most of them target self-employed customers or the affordable housing segment for better returns.”

Ms Nijjar added that while the segment offers good growth potential, the asset quality is inferior with gross NPAs of 1.5% as of September 30, 2018 compared to 0.5% in the salaried segment. She said that “In ICRA’s opinion, gross NPAs for HFCs in the home loan segment could increase to 1.1-1.3% over the medium term from the current level of 1%. Moreover, higher gross NPAs in the non-housing loan segment could lead to increase in overall gross NPAs for HFCs to 1.4-1.8% over the medium term.”

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Posted By : Joykumar Irom on Mon, 07 Jan 2019
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