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HFC portfolios are vulnerable as share of non-housing loans rising: Icra

The report covered various portfolio cuts of 28 HFCs

ANI  |  New Delhi 

Building on the middle-class dream

Even when continue to dominate the loan portfolio of Housing (HFC)s, the share of in the overall HFC portfolio has been declining owing to the higher pace of growth of non-housing loans, according to a report by

The report covered various portfolio cuts of 28 HFCs, which account for over 75 per cent of the overall housing loan portfolio of as on March 31.

Further, unlike their larger counterparts, the non-housing loan books of small largely consist of loans against property (LAP), which accounted for 25 percent of the total loan book as on March 31 compared with 14 per cent for all

As for the new HFCs operating in the affordable segment, the share of home loans at 83 per cent as on March 31 is significantly higher than all HFCs.

"penetration in the affordable segment continues to be high in western India, with Maharashtra alone accounting for half the portfolio of all financiers in the 'affordable' segment taken together, and the top three states, Gujarat and Rajasthan, apart from Maharashtra comprising 64 percent of the total," said Vice President, Financial Sector Ratings, ICRA, Supreeta Nijjar.

Though some of the larger HFCs are able to compete with banks in the salaried segment, most of the HFCs target self-employed customer segments or the affordable housing segment to optimise their yields and also capitalise on the higher growth potential.

Moreover, with the affordable segment and small HFCs growing at a faster pace than the overall HFC industry, expects the share of the self-employed segment to increase further.

Overall while the ticket sizes for all HFCs was around Rs. 24 lakhs as on March 31, HFCs operating in the affordable segment had significantly lower ticket sizes, at Rs 10 lakhs (Affordable - New) and Rs 12 lakhs (Affordable - All).

Nearly 60 per cent of the portfolio for all HFCs taken together, were in the Rs 10-15 brackets.

"The overall the increase in the share of the portfolio lent at higher fixed obligation to income ratio for small HFCs and the new affordable segment which indicates higher portfolio vulnerability for these players. Moreover, an increase in the share of riskier sub-segments like non-housing loans, self-employed and affordable housing in the overall portfolio of HFCs could impact asset quality indicators of HFCs," added Nijjar.

The increasing number of new entrants in the housing market, coupled with the focus of existing players, has increased the competitive intensity in the industry, leading to the dilution in lending norms.

First Published: Mon, October 30 2017. 14:12 IST