Icra sees housing credit growing up to 21% this fiscal

Housing credit growth is expected to remain steady at 19-21 per cent in the current fiscal and likely to gain pace from next fiscal onwards, says a report.
"Housing credit is expected to be at similar pace of 19-21 per cent in 2014-15 and pick up thereafter," rating agency Icra said in a report.
The total housing credit outstanding as on March 2014 was over Rs 9 trillion as against Rs 7.5 trillion as of March 2013, registering a growth of 20 per cent in FY'14.
The rating agency believes the mortgage penetration (mortgage loans as a percentage of GDP) could increase to double-digit levels by March 2018. Mortgage penetration levels increased to 8 per cent as of March 2014 from 7.6 per cent as on March 2013.

The report said despite a high interest rate scenario and difficult operating environment, housing finance companies (HFCs) have been able to report good asset quality indicators with gross NPAs at 0.73 per cent as of March 2014.
According to Icra, HFCs' gross NPAs are expected to remain range bound between 0.7-1 per cent over medium term.

"If HFCs were to grow at an annual 20-22 per cent over the next five years, they would, in our estimates, need tier I capital of around Rs 800 billion, of which around Rs 50,000- 55,000 crore could come from internal capital generation and the rest would have to be raised from external sources," Icra co-head (financial sector) Vibha Batra said.

The report said the profitability indicators for HFCs in FY'14 have been largely stable, with return on assets of 2.29 per cent, supported by stable net interest margins and operating/credit costs.
With stable net interest margins, some rise in credit provisions and rise in effective tax rate owing to change in regulations could lead to a 30-40 basis points decline in return on assets (1.8-2.1 per cent) and 100-150 basis points decline in return on equity (16-18 per cent) for HFCs in FY'15, Icra said.