HFCs may face slowdown in H2 FY19
MUMBAI: Housingfinance companies (HFCs) may see slowing credit growthinthesecondhalfof 2018-19 becauseoffactors suchas tight liquidity andintensecompetition, rating agency Icra said on Thursday.
The subdued credit portfolio growth, Icra said, is in contrast to the favourable period witnessed inthesecondhalfofthelastfinancial year.
“The home loan portfolio of housing finance companies has continued its growth trajectory and has grown at a faster pace of 18% y-o-ytill 30September2018as compared to the home loan book of banks, which grew at 16% y-o-y,” Icra said.
The non-housing loan portfolio of HFCs grew at 29% y-o-y at the end of Q2 FY19.
Average loan ticket sizes acrossHFCswasaround₹25lakh and more than 80% of the home loan portfolio was in the ₹10 lakh-1 crore bracket, which has reported better asset quality performancecomparedtolowerand higher ticket sizes.
Gross non-performing assets (NPAs) ratio as on 30 September 2018 was 1.3% (slightly higher than 1.1% as on 31 March 2018), but tight liquidity andslowdown in growth could impact the asset quality in the non-housing loan segment, Icra cautioned.
“Withinthehousingloanssegment for HFCs, the share of the self- employed segment has increasedto29% asonSeptember 2018.
Though some of the larger HFCscancompetewithbanksin the salaried home loan segment, most of the HFCs target self-employedcustomersegmentsorthe affordable housing segment to optimize their yields,” it said.
While the self-employed segment offers good growth potential, the report said, asset quality in this segment is inferior with gross NPA of 1.5% as on Q2 FY19 (1.1% ason31March2018) ascomparedwiththesalariedsegment’s gross NPA of 0.5% as on Q2 FY19 (0.4% as on 31 March 2018).
“In our opinion, gross NPAs for HFCs in the home loan segment could increase to around 1.1-1.3% over the medium term from the current level of 1%. Moreover, higher gross NPA ratio on the non-housing loan segmentcouldleadtoincrease in gross NPAs for HFCs to around 1.4-1.8% over the mediumterm,” said Supreeta Nijjar, vice-president and sector head, financial sector ratings, Icra.
The ability of HFCs to implementtimelycollectionandrecovery efforts in respect of the delinquent loans—repossessing the property wherever necessary, and selling the same in a timely manner—will be key, according to Nijjar .