Author: Don Obrien

Affordable housing finance firms witness moderation in growth: Icra

Mumbai: Affordable housing finance companies (AHFCs), growing at significantly higher rates than the overall housing finance industry, witnessed a moderation in growth in FY21 following the covid-19 induced challenges in the operating environment, Icra Ltd said on Wednesday.

Nevertheless, given the largely under-penetrated market, favourable demographic profile, government trust on housing and a favourable regulatory or tax regime support the long-term growth outlook for the sector, it said.

Manushree Saggar, vice-president and sector head (financial sector ratings), Icra said the growth in the loan book moderated to 10% year-on-year (y-o-y) in FY21 and Q1 FY22 due to the lockdowns following the second covid wave; while portfolio remained flat as on 30 June, as compared with 31 March.

“However, with some improvement in operating environment conditions demand is expected to pick up in the subsequent quarters and the affordable housing finance companies’ loan growth could increase to 12-15% for FY22,” said Saggar.

Icra noted that the second covid-19 wave has exerted further pressure on the asset quality indicators for these players. With stricter lockdowns across various states in Q1 FY22, the collections for these AHFCs were impacted and unlike the moratorium and restrictions on bucket movement which were available in Q1 FY21, there were no such dispensations this time.

Hence, delinquencies, especially, in the softer buckets shot up significantly, it said. To put this in perspective, the 30 plus days past due (dpd) for some select AHFCs increased to 7.2% as on 30 June from an estimated 3.2% as on 31 March; though headline 90+ dpd remained under control. Overall, for the AHFC industry, the reported gross NPA or stage three stood at 2.1% as on 30 June.

“With steady improvement in collection efficiencies since June 2021, forward bucket movement is likely to be contained for most players, though resolution/rollbacks could take longer as it would be difficult for the borrowers of these AHFCs to clear multiple instalments at the same time. Thus, ICRA expects gross NPA or stage three to be 3.6-3.9% by the end of March 2022 compared to 3.3% as on 31 March 2021,” Saggar added.

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