NBFC Crisis To Pull Down Home Loan Growth For The First Time In Three Years, Says ICRA
The NBFC crisis has impacted a slew of companies, including DHFL and Reliance Capital, slowing down credit growth of housing finance companies to 10 percent in FY19. (Photographer: Santosh Verma/Bloomberg News)

NBFC Crisis To Pull Down Home Loan Growth For The First Time In Three Years, Says ICRA


Home loan growth is set to slow down to 13-15 percent in 2019-20, lower than the average of the past three years, due to the lingering liquidity issues faced by non-banking financing companies, according to a report by ratings agency ICRA Ltd.

The NBFC crisis can also have an adverse impact on outstanding home loans, which stood at Rs 19.1 lakh crore as of March 2019, the ICRA report said.

“Given the tough operating environment, we expect housing credit growth in FY20 to be in the range of 13-15 percent, which is lower than the last three years when it clipped past 17 percent," ICRA Ratings said in the report.

The NBFC crisis, which surfaced in September 2018, has impacted a slew of companies—including Dewan Housing Finance Corp. Ltd. and Reliance Capital Ltd.—slowing down credit growth of dedicated housing finance companies to 10 percent in FY19.

Banks grew faster at 19 percent as against 13 percent, taking their overall market share to 64 percent from 62 percent in the year-ago period, ICRA said, adding that lenders will lead the growth curve in FY20 as well.

The gross NPA ratio from the overall housing finance exposures increased to 1.5 percent in March 2019, from 1.1 percent a year ago. There could be some pressure on the asset quality owing to the challenging operating environment and the emerging risk factors, ICRA said. The overall NPAs of HFCs will grow to up to 1.8 percent due to troubles faced by some developers, it said.

Unlike most previous financial years, when NPAs decline in the last quarter through enhanced recovery efforts, gross NPAs increased to 1.5 percent as on March 2019 from 1.1 percent as of March 2018.

In the affordable housing segment, gross NPAs declined to 4.6 percent as of March 2019 from 5 percent as of December 2018, ICRA said, attributing the same to write-offs and sale of NPAs by some of the players.

Housing finance companies would require Rs 4-4.5 lakh crore in FY20 to meet the growth requirement of 10-14 percent, ICRA said, adding that companies will have to resort to securitisation.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.