Affordable Housing Finance Companies bear the brunt of Covid: ICRA
The growth in the loan book for such companies moderated to 10% year on year at the end of the March 2021 quarter due to the lockdowns following Covid wave 2; while portfolio remained flat as on June 30, 2021, as compared with March 31, 2021.
“With some improvement in operating environment conditions demand is expected to pick up in the subsequent quarters and the loan growth could increase to 12-15% for FY2022,” said Manushree Saggar, Vice President and Sector Head – Financial Sector Ratings, ICRA.
The domestic rating agency noted that with stricter lockdowns across various states in the June quarter, the collections for these affordable housing finance companies were impacted. The impact was more visible as unlike the moratorium and a standstill clause of asset classification which were available earlier, there were no such dispensations this time.
To put this in perspective, the 30days past due for a few such companies, increased to 7.2% as on June 30, 2021 from an estimated 3.2% as on March 31, 2021.
Overall, the reported gross bad loan (excluding data for one player) stood at 2.1% as on June 30, 2021.
“With steady improvement in collection efficiencies since June 2021, forward bucket movement is likely to be contained for most players, though resolution/rollbacks could take longer as it would be difficult for the borrowers of these AHFCs to clear multiple instalments at the same time,” Saggar said.
ICRA expects gross bad loans to be 3.6-3.9% by the end of March 2022 compared to 3.3% as on March 31, 2021.
The agency noted that the liquidity profile of these entities is expected to remain comfortable supported by the sizeable on-balance sheet liquidity being maintained by these players. At the same time, the availability of funding lines would be imperative for growth, it said.
“Over the long term, the ability to improve the operating efficiencies further and control the credit costs would be imperative for improving the return indicators,” Saggar said.