HFC home loan portfolio growth slows in Q1: Icra

Icra also indicated that along with a slowdown in growth of housing loan portfolio, there has been a perceptible deterioration in overall asset quality too, which is a concern.

The on-book housing loan portfolio for housing finance companies (HFCs) and non-banking finance companies (NBFCs) grew at a much slower pace of 3% year-on-year (y-o-y) for the quarter ended June 2019 owing to lower disbursements in the first quarter and higher portfolio sell-downs, Icra said in a report. The portfolio had grown by 20% y-o-y a year ago.

On the other hand, banks continued to increase their retail home loan portfolios and their growth increased to 19% y-o-y during Q1FY20 against 16% a year ago.

Further, a modest shift in the market share was also seen since FY19 between the key lender segments with the share of banks increasing to 65% in Q1 from 62% as on March 31, 2019, Icra said, adding that this trend could continue for a couple of quarters. The total housing credit outstanding is estimated to be around Rs 19.2 lakh crore as on June 30, 2019.

Manushree Saggar, V-P and sector head, financial sector ratings at Icra, said the prolonged slowdown could impact the debt servicing ability of home loan buyers. “Further, under-construction properties sold by builders under subvention or buyback/assured return schemes could be more vulnerable as some of the builders are facing liquidity crunch and the ability to honour these obligations may be limited,” Saggar said.

Icra also indicated that along with a slowdown in growth of housing loan portfolio, there has been a perceptible deterioration in overall asset quality too, which is a concern.

Saggar further explained that in Icra’s opinion, gross non-performing assets (GNPAs) in the HFC home loan segment are likely to increase to around 1.3-1.5% over the medium term from the current level of 1.2%. “Moreover, given the tight liquidity faced by some developers, already delayed projects and reduced fund availability to the developers could lead to some further stress on the construction finance portfolio of the HFCs, leading to an increase in the overall GNPAs from 1.8% to 2.2% over the medium term,” she said.

Icra estimates that HFCs would require around Rs 4-4.5 lakh crore of fresh borrowings in FY20 to meet the growth requirement of 10-14% and a part of this requirement could also be met through the securitisation of portfolios.