Affordable Housing Finance Companies’ Loan Portfolio Will Grow 17-20% in FY23, Study Finds
“We expect Affordable Housing Finance Companies (AHFC) loan portfolios to grow 17-20% in fiscal 2023, due to factors including a largely underpenetrated market, a favorable demographic profile, government confidence in housing and a favorable regulatory/taxation regime that supports growth prospects,” ratings agency Icra Ratings said in a recent report.
Its Vice President (Financial Sector Ratings) Manushree Saggar said that after witnessing a moderation in loan book growth in the first quarter of fiscal 2022, AHFC growth resumed in the second and third quarters of fiscal 2022, with their disbursements reaching 85-90% of the peak. levels seen in the fourth quarter of fiscal 2021.
“As a result, AHFCs recorded growth of 14% (year-on-year) as of December 31, 2021. Overall, although growth has moderated compared to the long-term average, it continues to remain above the entire housing finance industry average,” she said.
The agency said the second wave of the Covid-19 pandemic put pressure on AHFC asset quality and delinquency indicators, particularly in the softer bands (0-30, 30-60 and 60-90 days late i.e. dpd) significantly.
However, with collection efficiency improving in the second and third quarters of fiscal 2022, delinquencies in the softer buckets have moderated, he said.
At the same time, the gross percentage of NPA/Stage 3 reported increased as entities aligned their reports with the clarification issued by the RBI on the Revenue Recognition, Asset Classification and Provisioning (IRACP) standards.
The 30 days overdue for some AHFCs decreased from 9% as of June 30, 2021 to 6.8% as of December 31, 2021, while the percentage reported GNPA/Stage 3 increased slightly from 4.2% as of June 30, 2021 to 4.3% as of December 31, 2021, according to the report.
With some improvement in the operating environment and business outlook, the agency expects the reported gross NPA/Stage 3 percentage to moderate in fiscal 2023, supported by book growth and new controlled skids.
Saggar further stated that with an expectation of stable net interest margins, higher operational efficiencies with improved scale and moderation in credit costs, the return on assets (RoA) for AHFCs is expected to be between 2.5 and 2.7% in fiscal year 2023.