Growth for AHFCs picked up in Q2 and Q3 FY2022, says Saggar
The loan books for affordable housing finance companies (AHFCs) are expected to grow by 17-20% in FY2023, driven by factors like largely underpenetrated market, favourable demographic profile, government trust on housing and a favourable regulatory and tax regime that support the growth outlook, according to ICRA.
As on 31 December 2021, the total loan book of AHFCs stood at Rs.66,221 crore and constituted about 6% of the overall HFC loan book.
“After witnessing a moderation in the loan book growth in Q1 FY2022, the growth for AHFCs picked up again in Q2 and Q3 FY2022, with disbursements for the AHFCs reaching 85-90% of the peak levels seen in Q4 FY2021,” said Manushree Saggar, Vice President, Financial Sector Ratings, ICRA.
“As a result, the AHFCs reported a 14% (year-on-year) growth as on 31 December 2021. Overall, while the growth has moderated over the long-term average, it continues to remain higher than the overall housing finance industry average,” Saggar said on 2 May 2022.
Covid 2.0 had exerted pressure on the asset quality indicators for these players and delinquencies, especially in the softer buckets shot up significantly.
However, with improvement in collection efficiency in Q2 and Q3 FY2022, the delinquencies in the softer buckets moderated. At the same time, the reported gross NPAs-Stage 3% increased as entities aligned their reporting with the clarification issued by the RBI on IRAC norms.
To put this in perspective, the 30 days past due for some AHFCs declined from 9% as on 30 June 2021 to 6.8% as on 31 December 2021 while the reported GNPA-Stage 3% marginally increased from 4.2% as on 30 June 2021 to 4.3% as on 31 December 2021.
With some improvement in operating environment and business outlook, ICRA expects that the reported gross NPA-stage 3% will moderate in FY2023, supported by book growth and controlled fresh slippages.
The liquidity profile of these entities is expected to remain comfortable supported by the sizeable on-balance sheet liquidity being maintained by these players and comfortable capitalisation levels. At the same time, the availability of funding lines would be imperative for growth.
The banking channel and NHB will remain key sources of incremental funding. These AHFCs would need external capital for growth in case they were to return to high growth trajectory as internal capital generation remains modest.
Improvement in the earnings profile of these AHFC in 9MFY2022 was supported by better margins and moderation in the credit costs. While operating expenses witnessed an uptick with higher business volumes, the impact was offset by the reduction in the credit costs.
“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,” Saggar said.
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 Rs.10 lakh individual housing loans has gradually been increasing.
While collection efficiency improved across players in Q2 and Q3FY2022, the reported asset quality indicators for Q3 FY2022 were adversely impacted due to the IRAC norms related to the clarification issued by the RBI. fiinews.com
