Housing finance players loan portfolio to grow at 8-10% in FY22: Report

Housing finance companies are likely to witness a portfolio growth at 8-10 per cent in the current fiscal and 9-11 per cent in FY 2022-23, according to a report.

After an impact on their disbursements in Q1 FY2022, non-banking financial companies-housing finance companies (NBFC-HFC) saw a sharp recovery in the second quarter. Their on-book portfolio is estimated at Rs 11.6 lakh crore, up 9 per cent year-on-year, in the first half of FY2022.

Going forward, the growth trend is expected to continue, driven by healthy demand in the industry, increasing level of economic activity and increasing vaccination in the country, Icra Ratings said in the report released on Wednesday.

We retain our growth estimate of 8-10 per cent for the on-book portfolio of HFCs in FY2022. Further, HFCs on-book portfolio is estimated to grow by 9-11 per cent in FY2023, the agency's Vice President and Sector Head (Financial Sector Ratings) Sachin Sachdeva said.

As for the gross NPAs (GNPAs), the second wave of infections and the prolonged weakness in the operating environment challenged the recovery since Q3 FY2021, which led to a decline in collection efficiency (CE) and hence deterioration in the asset quality metrics in Q1 FY2022, the agency said in a release.

However, the industry saw a sharp recovery in CE in Q2 FY2022 and the (GNPAs) reduced by around 50 basis points (bps) in the same quarter.

Sachdeva said the reported GNPA ratio of HFCs is estimated to increase to 3.6-3.8 per cent as of March 31, 2022, compared to an earlier estimate of 3.3-3.6 per cent.

Thereafter, some recovery is expected in FY2023 with the GNPA ratio declining to 3.2-3.5 per cent by March 31, 2023, he said.

The report said the stress on cash flows of borrowers caused by the pandemic also renewed demand for restructuring. The industry's outstanding restructured portfolio increased to around 2.3 per cent of assets under management (AUM) as of September 30, 2021, from around 1.1 per cent as of March 31 last year.

It expects the restructured book to reduce slightly, driven by recoveries and slippages, to around 2-2.1 per cent of the AUM by March 31, 2022.

On profitability of HFCs, Sachdeva said the expected elevated credit costs are likely to keep the profitability moderate in FY2022, similar to FY2021.

However, it is expected to improve further in FY2023, close to the pre-COVID level, Sachdeva added.