Housing finance companies (HFCs) will face some headwinds due to rising interest rates and property prices, as well as the resulting slowdown in home affordability, resulting in a small drop in loan sales growth to 12.3 percent next fiscal year, according to a survey.
In a study released on Tuesday, India Ratings stated that these factors, together with rising inflation, will have an impact on borrowers’ cash flows, affecting asset quality somewhat.
The agency anticipates a little increase in stressed accounts, which have been noticeable since early FY23 as a result of rising prices and interest rates on borrower cash flows.
NPAs peaked at 2.9 percent for the top 12 HFCs in FY21, then improved to 2.8 per cent in FY22. In FY22 and FY21, the overall stressed book (defaults and restructured loans) stayed around 4 per cent.
The agency predicts GNPA to fall to 2.5 percent in FY23 before rising slightly to 2.67 per cent in FY24. Nonetheless, the impact on overall credit costs will be negligible, remaining at FY23 levels.
HFCs could climb 12.3 per cent year on year in FY24, down from 12.6 per cent in FY23. In the preceding fiscal year, the industry expanded by 10.4 per cent. According to the agency, the affordable category cutting at 16 per cent will drive industry expansion.
The AUM of parent-supported HFCs grew 31 per cent faster than the general industry growth rate of 12.4 per cent in the first three quarters of the current fiscal year, it added, maintaining its stable forecast on the segment for the coming year.
While competitive pressures for the sector will remain high, lenders will look to diversify across non-housing to mitigate margin pressures, it said, adding that it expects affordable housing financers to see continued strong loan growth, owing to increased geographic penetration, increased ticket size, and additions in customer base due to an increasing sense of home ownership.
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Given this, the agency anticipates that the demand experienced during the pandemic due to an increased desire for house ownership and the continuance of home upscaling would continue in the medium term, generating growth for lenders in FY24.
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