The ongoing liquidity crisis faced by the non-banking financial companies (NBFC) is likely to drag down growth in housing finance to 13-15 per cent this fiscal, lower than the average of the past three years, according to a recent report by ratings agency Icra.
“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,” ICRA Ratings said in a note.
The NBFC crisis, which surfaced in September 2018, has impacted a slew of companies — including Dewan Housing Finance Corporation Ltd and Reliance Capital Ltd — slowing down credit growth of dedicated housing finance companies to 10 per cent in FY19.
The overall industry loan growth for Housing Finance Companies (HFC) had slowed down to 15 per cent for FY18. Banks grew faster at 19 per cent as against 13 per cent, taking their overall market share to 64 per cent from 62 per cent in the year-ago period, ICRA said.
The agency also flagged concerns over pressure on the asset quality, owing to the challenging operating environment and the emerging risk factors.
The gross non-performing assets (NPA) ratio from the overall housing finance exposures increased to 1.5 in March 2019, from 1.1 a year ago. The agency warns that going forward, the overall NPAs of HFCs will grow to up to 1.8 per cent due to troubles faced by some developers, it said.
Growth in affordable new housing segment declined to 4.6 per cent 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 players.
HFCs would require Rs 4-4.5 trillion in FY20 to meet the growth requirement of 10-14 per cent, ICRA said, adding that companies will have to resort to securitisation.
What more?
There can also be an adverse impact on the outstanding housing credit, which stood at I19.1 lakh crore as of March 2019
The overall industry loan growth for housing finance companies had slowed down to 15 per cent for FY18
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 pressure on the asset quality, owing to challen-ging operating environment and emerging risk factors