ICRA flags need to monitor asset quality as loan book expands for affordable housing finance firms



The loan book for affordable housing finance companies (AHFC)s is expected to grow by 17-20% in FY2023, rating agency ICRA said in a report. But, it also warned that asset quality needed to be monitored.

It said loan book growth would be driven by factors such as ‘the largely underpenetrated market, favourable demographic profile, government thrust on housing and a favourable regulatory and tax regime that supported the growth outlook’. As on December 31, 2021, the total loan book of AHFCs stood at ₹66,221 crore and constituted about 6% of the overall HFC loan book.

Over the years, the share of AHFCs in the overall housing finance industry has remained stable at 5-6%. However, the share within the less than ₹10 lakh individual housing loans has gradually been increasing.

While collection efficiency improved across players in the second and third quarter of the fiscal year ended March, the reported asset quality indicators for Q3 were adversely impacted due to the IRAC norms related to the clarification issued by the Reserve Bank, ICRA said.

“After witnessing a moderation in the loan book growth in Q1, the growth for AHFCs picked up again in Q2 and Q3, with disbursements for AHFCs reaching 85-90% of the peak levels seen in Q4,” said Manushree Saggar, vice-president, Financial Sector Ratings, ICRA, . As a result, AHFCs reported a 14% year-on-year growth as on December 31, 2021.”

“Overall, while the growth has moderated over the long-term average, it continues to remain higher than the overall housing finance industry average,” she said.

Covid 2.0 had exerted pressure on the asset quality indicators for these players and delinquencies, especially in the softer buckets, shot up significantly, she added.

“With an expectation on stable net interest margins, higher operating efficiencies with improved scale and moderation in credit costs, the return on assets (RoA) for these AHFCs is likely to be between 2.5%-2.7% in FY2023.”

“Over the long term, the ability to improve the operating efficiencies further and control the credit costs would be imperative for improving the return indicators,” Ms. Saggar added.


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