Third wave curbs asset growth of housing finance companies by 200 basis points

The third wave of the pandemic could shave 100 to 200 basis points (bps) off growth in housing finance companies (HFCs) assets, Crisil said in a report.

“The third wave of the COVID-19 pandemic could reduce up to 200 basis points… [the] base case estimate of 9-11% compound annual growth rate (CAGR) of assets under management (AUM) of HFCs for fiscal years 2022 and 2023,” the rating agency said in the report.

He said growth would be even higher compared to the 2% average in fiscal years 2020 and 2021, although slower than the broad-based 24% recorded between fiscal years 2011 and 2019. This period had seen a nearly increase in the number of HFCs fueled by equity and debt capital availability.

“The growth this time around will largely come from players with better credit profiles,” Crisil said. “Organic consolidation, which began in fiscal 2019, will continue,” he added.

Of the total HFC AUM of Rs 13.2 lakh crore as of March 31, 2021, home loans constituted the largest segment (71%), followed by wholesale loans (18%) and loans against property (LAP; 11 %).

Krishnan Sitaraman, Senior Director and Deputy Head of Ratings, Crisil Ratings, said: “Real estate lending will be the fastest growing segment as lenders continue to be selective in the non-real estate segment (including wholesale lending and LAP).

“After relatively weak growth in recent years, the home loan segment is expected to register a CAGR of 12-14% in fiscal 2022 and 2023. This will be driven by improving sales, better affordability and a preference for lending. home ownership and larger homes. he said.

“That said, the third wave of the pandemic could reduce this growth by 100 to 200 basis points depending on its spread, intensity and duration,” he added.

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