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  3. HFCs likely to see muted portfolio growth: ICRA

HFCs likely to see muted portfolio growth: ICRA

21 Aug 2020 Evaluate

ICRA in its latest report has said that housing finance companies (HFCs) are likely to see a muted portfolio growth and would require Rs 3.8-4.5 lakh crore to meet their refinancing requirements in the current fiscal and achieve portfolio growth of up to 5 per cent. It said the COVID-19-induced slowdown is likely to impact HFCs and pose several other challenges. As per the report, the pandemic effect is expected to lower the housing credit growth to 5-8 per cent in the financial year 2021, significantly below the last three years' CAGR (Compound annual growth rate) of 14 per cent, the report expects.

As for the means of funding, the share of commercial paper (CP) borrowings reduced to 4 per cent of the overall borrowings of HFCs as on March 31, 2020 (7 per cent as on March 31, 2019). They were largely replaced by bank borrowings, which increased to 27 per cent from 24 per cent during this period. The overall gross non-performing assets (GNPAs) of HFCs increased to 2.4 per cent as on March 31, 2020 from 1.6 per cent as on March 31, 2019.

Going forward, the net interest margins of the HFCs are expected to remain stable as the cost of funds could moderate. However, a slowdown in growth is likely to impact the operating expense ratios while the credit costs could remain elevated. The agency expects the return on assets to remain range-bound between 1 per cent and 1.2 per cent in financial year 2021 with the credit costs expected to be 0.8-1 per cent in financial year 2021 compared to 1.1 per cent last year.

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