Housing finance cos to see slower credit growth in FY21: Report

Housing finance companies are likely to see a slower credit growth of 9-12 per cent in the current financial year as their disbursement may be impacted by the COVID-19 related disruptions, says a report.

The gross non-performing assets of mortgage financiers may also increase to 1.8-2 per cent by March 2021, rating agency Icra said in a report.

Its vice president and sector head (financial sector ratings) Supreeta Nijjar said the Covid-19 induced slowdown may impact the portfolio growth of HFCs in FY2021.

"The estimated housing credit growth is likely to be 9-12 per cent in FY21 (lower than the last three years' CAGR of 16 per cent). It is likely that people will defer their home purchases and home improvement/extension decisions in the current fiscal, till they are able to achieve stability in income levels/resumption of business activities, Nijjar said in a report.

Their credit growth is estimated to be slower in the first half of 2020-21 while the recovery in the second half will be dependent on the overall economic turnaround, she said.

The loan growth of housing financiers in the last quarter of FY2019-20 is estimated to be at 11-13 per cent as their fresh loans disbursement would have been impacted in March, she said.

"GNPAs in the housing segment is expected to increase to 1.8-2 per cent by March 2021 from 1.4 per cent as of December 2019 while slippages in the non-housing segment could be higher with GNPAs increasing to 3-3.5 per cent in FY2021 from 2.1 per cent as on December 31, 2019," Nijjar said.

The liquidity of repossessed properties could get impacted, leading to delays in recoveries or possibly higher losses on the sale of such properties, she said.

The rating agency said while the profitability indicators (RoE) are likely to remain range-bound in FY20 between 13-15 per cent, a prolonged slowdown in growth and the Covid-19 related impact on the asset quality could lead to an increase in the credit costs in FY2021.

"This could lead to a moderation in the profitability indicators for FY2021 by around 200-300 basis points," Nijjar said.

The Rs 50,000 crore of additional TLTROs announced on April 17, 2020, and the additional Rs 10,000 crore of refinance facility to National Housing Bank (NHB) will support the immediate liquidity requirements of HFCs to some extent, especially those operating in the affordable housing space where collections are likely to be impacted more, the rating agency said.