Asset quality of HFCs to worsen, says ICRA ratings

New Delhi, June 26 (IANS) ICRA ratings expects the asset quality of housing finance companies (HFCs) to worsen going forward.

The agency's aggregated analysis report of its rated HFCs said the GNPAs (gross NPAs) in the housing segment is estimated to increase to 2.5-3 per cent in FY2021 from an estimate of 1.7 per cent as on March 2020.

“… Those in the non-housing segment could be higher, leading to overall GNPAs of 3-4.5 per cent by the end of FY2021 from estimated 2.5 per cent as on FY2020,” the report said.

“Around 30 per cent of the HFCs' portfolio is under the moratorium as on May 31, 2020. Given the likely impact on the cashflows of borrowers, there could be some more slippages from these accounts once the moratorium is lifted.”

As for HFCs in the affordable segment, the report said: “They have a higher share of portfolios under moratorium owing to the relatively marginal borrower profile, which may have been impacted more during the Covid-19 related lockdown.”

Besides, the share of the self-employed segment in the housing loan book of HFCs increased over the years to 32 per cent as on December 31, 2019 from 25 per cent as on March 31, 2016.

“This segment was already performing weaker than the salaried segment with the GNPA per cent in this segment being almost 3 times of the salaried segment as on December 31, 2019, and thus deterioration could be even sharper due the pandemic,” the report said.

Furthermore, ICRA notes that liquidity of repossessed properties could get impacted and lead to an increase in the ultimate losses, especially those that were recently originated and financed at higher loan-to-value (LTV) ratios, in case of a significant correction in the property prices.

“For portfolio availing moratorium, the LTVs could increase by 6-10 per cent for recently originated loans extended at higher interest rates ranging between 14 per cent and 18 per cent,” the report said.



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