The pandemic effect is expected to lower the housing credit growth to 5-8% in FY’2021, significantly below the last three years’ CAGR of 14%, Icra said. The growth is expected to be slower in the first half of FY’2021 as disbursements were significantly lower in the first quarter of FY’2021 and started picking up from July 2020.
The overall recovery in H2 FY2021 depends on the economic turnaround as some borrowers may defer their home purchases till they are able to achieve stability in their income levels or in the resumption of business activities.
Also, HFCs are likely to be differentiated on their ability to control fresh slippages amid slowdown in growth and steady easing of funding challenges. “The Covid-19-induced loss of income is likely to impact the asset quality of HFCs across the retail and wholesale segments” said Supreeta Nijjar, vice president, financial sector ratings, Icra. “Within housing, the asset quality in the affordable and self-employed segment could worsen more vis-à-vis the salaried segment, which is expected to exhibit more resilience. However, salary cuts/job losses in certain sectors could lead to some weakening in the debt repayment capability of the borrowers”
The construction finance segment, which was already under pressure due to demand-side issues, was further impacted by labour migration and lockdowns, which will delay project execution, completion and sales, and thus impact the cash flow of this borrower segment.
ICRA notes that the overall on-book housing loan portfolio growth of HFCs and non-banking financial companies (NBFCs) reduced significantly to 3% Y-o-Y in FY2020 due to funding constraints for a major part of the fiscal.