Affordable housing segment to remain key growth driver in Indian Mortgage Finance Market: ICRA

icraBy Accommodation Times bureau

Inline with ICRA estimates, that the total housing credit outstanding in India  slowed down to 16% for the 12 months ending December 31, 2016 vis-à-vis 19% in FY2016  with the overall housing credit being Rs. 1 3.7 trillion as on December 31, 2016 (Rs. 12.4 trillion as on March 31, 2016).

While HFCs continued to grow at a similar pace as FY2016 levels, banks’ pace of growth slowed down to 16% for the year ended December 2016, largely because they were operationally tied up in Q3FY2017 on account of demonetisation. Growth was also impacted with buyers and investors deferring their home purchase decisions in expectation of a decline in real estate prices and subdued demand from the self-employed segment. The extent of bounce back in the borrowers’ businesses would be the key determinant for the near to medium term demand from the self-employed segment. Further, reduction in MCLR by various banks could lead to increased competition and balance transfers, especially in the prime salaried segment.

Mr. Rohit Inamdar, Senior Vice President and Group head Financial Sector Ratings, said, “With focus of the GOI on affordable housing segment including a number of initiatives such as 39% higher allocations vis-a-vis FY2017 under the Pradhan Mantri Awas Yojana (PMAY), extension of the Credit Linked Subsidy scheme to loans of value upto Rs. 1.2 million, efforts are being made to address the supply side, demand side and affordability issues and  are likely to   expand the borrower base. In ICRAs opinion affordable housing segment is likely to grow at a faster pace than industry at  over 30% over the medium term“.

The asset quality indicators continue to remain resilient with the Gross NPAs of 0.9% as on December 31, 2016 “ Post demonetization, the delinquencies in the affordable housing and self-employed segments reported some increase, owing to their relatively higher share of self employed segment which got more impacted due to demonetisation, from 1.07% as on September 2016 to 1.25% as on December 31, 2016. Further, if the dispensation were not given the Gross NPA% would have been higher at 1.50%. In ICRA’s opinion, there could be some further increase in delinquencies especially in the affordable housing and self-employed segments. Further, liquidity of properties may get impacted post demonetisation given the expected correction in property prices impacting the loss given default.  Overall we expect gross NPAs for HFCs to remain range bound between 0.9% – 1.3% over the medium term.”Mr. Rohit Inamdar, added.

Incremental funding costs for HFCs have come down considerably in the second half of FY2017 with many HFCs raising funds at median rates of 7.5-8%. Therefore, cost of funds is likely to moderate further for HFCs.  The reported capital adequacy for HFCs remained comfortable, benefitting from relatively lower risk weights for home loans and commercial real estate loans for residential projects.  The overall gearing level remained stable at 8.0 times as on December 31, 2016.  In ICRA’s estimates, HFCs will require around Rs. 160-275 billion of external capital (30-50% of the existing net worth of the HFCs) to grow at a CAGR of 18-20% for the next three years at internal capital generation levels (post dividend), of 15-16% and at gearing levels of 8.5-9 times.

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