Housing finance companies likely to grow at 10-12% in FY23: Report

Domestic rating agency Icra Ratings on Wednesday revised the growth estimate for Housing Finance Companies (HFCs) to 10-12 per cent for FY23 from an earlier projection of 9-11 per cent.

The upwards revision of the growth of HFCs was in expectation of a continued improvement in disbursements.

Icra’s Vice President and Sector Head (Financial Sector Ratings) Sachin Sachdeva said that after witnessing disruptions in the business volumes, because of the second wave of the pandemic, the industry saw a recovery in the disbursements and HFC’s portfolio growth rate started increasing during the last few quarters.

“This helped the industry witness improvement in portfolio growth rate in FY2022. Given the buoyancy in the disbursements, we have revised its (HFCs) growth estimate to 10-12 per cent for FY2023 (from 9-11 per cent earlier),” Sachdeva said.

The on-book portfolio of the Non-Banking Financial Companies-Housing Finance Companies (NBFC-HFC) sector grew to Rs 12.2 lakh crore as of March 31, 2022, registering 11 per cent year-on-year growth.

The growth was slightly better than the agency’s growth estimate of 8-10 per cent for FY22, the agency said in a report.

This was driven by the growth in disbursements in the last three quarters of FY22 as the second wave of the pandemic had impacted the business volumes in the first quarter of FY22, it said.

The industry also saw a reduction in its Gross Non-Performing Assets (GNPAs) in the fourth quarter of FY22 after having witnessed an increase in the third quarter of same fiscal.

The tighter regulations (Reserve Bank of India’s notification – Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances Clarifications dated November 12, 2021) on the recognition and upgradation of GNPAs led to an increase in GNPAs in the third quarter of FY22.

However, with the increased recoveries, the industry saw a reduction in GNPAs in the fourth quarter of last fiscal. It witnessed good recoveries from the restructured book and with growth in the Assets Under Management (AUM), the standard restructured book declined to around 1.7 per cent of AUM as on March 31, 2022.

The agency expects further improvement in the asset quality indicators in FY23, with the expectation of improved collections from delinquent accounts.

However, the performance of the restructured book would remain monitorable. The rating agency has retained its estimate of GNPAs of 2.7-3 per cent as of March 31, 2023, it said.

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