Housing finance growth may slow to 15% this fiscal due to NBFC crisis

Housing finance growth is set to slow down to 13-15 per cent this fiscal, lower than the average of the past three years, due to the lingering liquidity issues faced by non-banking lenders, warns a report.

There can also be an adverse impact on the outstanding housing credit, which stood at Rs 19.1 trillion as of March 2019, ratings agency Icra said in a weekend report.

It can be noted that the government is betting on housing sector as one of the major vehicles to push the sagging economic growth.

Given the tough operating environment, we expect housing credit growth in FY20 to be in the range of 13-15 per cent which is lower than the last three years when it clipped past 17 per cent, it said in anote.

The overall industry loan growth for housing finance companies had slowed down to 15 per cent for FY18.

It said the issues with the non-banking lenders since last September that has seen a slew of companies like DHFL and Reliance Capital suffering, slowed down credit growth of dedicated housing finance companies to 10 per cent in FY19.

Banks grew faster at 19 per cent as against 13 per cent, taking their overall market share to 64 per cent from 62 in the year-ago period, it said, adding banks will lead the growth curve in FY20 as well.

However, given the under-penetration of mortgages, the agency expects growth to recover soon.

The gross non-performing assets ratio from the overall housing finance exposures increased to 1.5 in March 2019, from 1.1 a year ago.

There could be some pressure on the asset quality owing to the challenging operating environment and the emerging risk factors, it warned.

The overall NPAs of HFCs will grow to up to 1.8 per cent due to troubles faced by some developers, it said.

Unlike most previous financial years, when NPAs decline in the last quarter through enhanced recovery efforts, gross NPAs increased to 1.5 per cent as on March 2019 (against 1.4 per cent in December 2018) from 1.1 per cent as of March 2018.

Some reduction in NPAs was seen in the affordable new housing segment, to 4.6 percent as of March 2019 from 5 per cent as of December 2018, it said,attributing the same to write-offs and sale of NPAs by some of the players.

Housing finance companies would require Rs 4-4.5 trillion in FY20 to meet the growth requirement of 10-14 per cent,it said,adding companies will have to resort to securitisation.