17-20% growth expected in Affordable housing finance companies’ loan book in FY23- Study

The total loan book of AHFCs stood at Rs 66,221 crore and constituted about 6 per cent of the overall housing finance companies (HFCs) loan book As on December 31, 2021.

Supported by the government’s higher focus on housing and a favourable tax regime, the affordable housing finance companies ‘ (AHFCs) loan book is likely to expand by 17-20 percent in the current financial year, as per a report. The total loan book of AHFCs stood at Rs 66,221 crore and constituted about 6 percent of the overall housing finance companies (HFCs) loan book as of December 31, 2021.

“We expect the loan books for affordable housing finance companies (AHFC)s to grow by 17-20 percent in FY2023, driven by factors like largely under-penetrated market, favourable demographic profile, government trust on housing, and a favourable regulatory/tax regime that support the growth outlook,” as per rating agency Icra Ratings recent report.

Vice President (Financial Sector Ratings) Manushree Saggar of Icra Ratings said after witnessing a growth in the loan book in Q1 of FY2022, the growth for AHFCs picked up again in Q2 and Q3 FY2022, with their disbursements reaching 85-90 percent of the peak levels seen in the fourth quarter of FY2021.

“As a result, the AHFCs reported a 14 percent (year-on-year) growth as on December 31, 2021. Overall, while the growth has moderated over the long-term average, it continues to remain higher than the overall housing finance industry average,” she added.

Since the second wave of the Covid-19 pandemic put pressure on the asset quality indicators of AHFCs and delinquencies, especially in the softer buckets (0-30, 30-60 and 60-90 days) the past due shot up significantly. However, with improvement in collection efficiency in Q2 and Q3 FY2022, the delinquencies in the softer buckets moderated the report said.

The 30 days past due for some AHFCs declined from 9 percent as on June 30, 2021 to 6.8 percent as on December 31, 2021 while the reported GNPA/Stage 3 percentage marginally increased from 4.2 percent as on June 30, 2021 to 4.3 percent as on December 31, 2021, the report said.

Saggar further said with an expectation of stable net interest margins, higher operating efficiencies with improved scale and moderation in credit costs, the return on assets (RoA) for AHFCs is likely to be between 2.5-2.7 percent in FY2023.

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