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The total housing credit growth slowed down to 16 per cent in FY2017 from 19 per cent in FY2016, with the overall housing credit standing at Rs 14.4 lakh crore as on March 31, 2017 (Rs 12.4 lakh crore as on March 31, 2016).
According to ICRA’s June report on trends in Housing Credit, while the slowdown was across both HFCs and banks, the decline in the pace of growth of banks was higher – declining from 18 per cent in FY2016 to 15 per cent for FY2017 – largely because they were operationally tied up in H2FY2017 on account of demonetisation.
The growth in the sector was also impacted by a slowdown in new project launches with buyers and investors deferring their home purchase decisions in expectation of a decline in real estate prices.
Rohit Inamdar, Senior VP and Group Head, Financial Sector Ratings, said, “HFCs operating in the affordable housing space, with a total portfolio of Rs 1.2 lakh crore, continued to grow at a faster pace of 28 per cent in FY2017 compared to the industry. These HFC’s growth was supported by an increase in supply as affordable housing projects, the infrastructure status accorded to the sector and the improved borrower affordability supported by lower interest rates and capital subsidy through the credit-linked subsidy scheme. ICRA expects affordable housing finance to continue to outpace the industry, going forward as well.”
HFCs’ asset quality remained comfortable with gross NPAs of 0.84% as on March 31, 2017.
Smaller HFCs with a higher share of self-employed customers had reported an increase in gross NPAs in Q3FY2017 with borrower cashflows being impacted by demonetisation; the asset quality however improved in Q42017.
Large HFCs continued to rely more on debt market instruments and fixed deposits for meeting their funding requirements. While bank borrowings and debt market instruments continued to account for a sizeable share of the overall funding for small HFCs, these entities were also able to draw substantial NHB funding.
Cost of funds for HFCs overall moderated from 8.48 per cent in Q3FY2017 to 8.08 per cent in Q4FY2017 owing to softening of interest rates and the higher share of debt market borrowings.
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