Growth of 8–10% is anticipated for housing financing companies in FY22, according to the report

MUMBAI: According to a report, housing finance companies (HFCs) are projected to have a rate of growth of 6-8% during the year and 8-10% in FY2021-22 as a result of the demand for housing loans increased in the final two quarters of fiscal 2020–21.

With the exception of one significant player’s portfolio, which experienced a sizable write-off, the on-book portfolio growth for HFCS in the first nine months of FY2021 (compared to March 2020) decreased from portfolio growth of 6% (Y-o-Y) in FY2020 to 4.3%.

In research, Icra Ratings stated that due to the industry’s recovery in housing credit demand over the past two quarters, the majority of HFCS have already disbursed at or close to pre-Covid levels and are aiming to do so again in Q4 FY2021.

“As a result, it is anticipated that the growth rate for FY2021 will rise to 6 to 8 %. After that, we predict that HFCS’s on-book portfolio will rise by 8 to 10 % in FY2022 “the agency stated.

The overdue of HFCS has risen in the first nine months of FY2021, as per Icra’s vice president and sector head Sachin Sachdeva, as reflected by proforma GNPAs of about 2.7% as on December 31, 2020, as compared to reported GNPA of 2.4% as on March 31, 2020. This is due to the cash flow stress that the borrowers are experiencing.

Indicators of asset quality may be further impacted in Q4 of FY2021, he warned.

Не sees GNPAs of HFCS for FY2021 to be higher by 50-100 premise focuses, contrasted with FY2020, and the equivalent to stay raised in FY2022 too.

Notwithstanding the fact that business has improved in the last two-quarters of FY2021, Sachdeva predicted that asset quality concerns and comparatively slower business development than in previous years will restrain the HFCs’ profitability in FY2021.

In FY2022, he said, a solid provision cover maintained by the majority of the businesses is anticipated to act as a buffer and preserve profits from Covid-related asset quality stress.

Although it is expected that HFCs would resume their previous profitable and development trajectory in FY2022, the growing Covid-19 infections, and localized lockdowns remains a source of worry.

It would be crucial for HFC to keep up its growth momentum and control any slippages if it wanted to keep its credit profile intact “He said.

Furthermore, according to the research, HFCs have been steadily reducing their reliance on short-term funding options like commercial papers and maintaining adequate on-balance-sheet liquidity for the past few quarters, which has improved asset-liability mismatches in the near-term buckets.

Given the difficult climate, the rating agency anticipates that HFCs will maintain strong liquidity in the foreseeable future.