Domestic rating agency ICRA, on March 22, 2017, said that the affordable housing segment is likely to grow over 30% over the medium term and will be the key growth driver for the mortgage finance market.
“With the focus of the government on the affordable housing segment, including a number of initiatives such as 39 % higher allocations vis-à-vis FY 2016-17 under the Pradhan Mantri Awas Yojana (PMAY), extension of the credit-linked subsidy scheme to loans of value upto Rs 1.2 million, efforts are being made to address the supply side, demand side and affordability issues and are likely to expand the borrower base,” the rating agency’s senior vice-president and group head (financial sector ratings), Rohit Inamdar, said in a report.
The rating agency said it expects the affordable housing segment to grow at a faster pace than industry, at over 30% over the medium term. It said, post demonetisation, the delinquencies in the affordable housing and self-employed segments reported some increase, from 1.07% as on September 2016 to 1.25% as on December 31, 2016. Inamdar said there could be some further increase in delinquencies, especially in the affordable housing and self-employed segments, going ahead. “Liquidity of properties may get impacted post demonetisation, given the expected correction in property prices. Overall, we expect gross NPAs for housing finance companies (HFCs) to remain range-bound, between 0.9% and 1.3% over the medium term,” Inamdar said.
The report said incremental funding costs for HFCs have come down considerably in the second half of the current financial year, with many HFCs raising funds at median rates of 7.5%-8%. The rating agency said HFCs will require around Rs 16,000-27,500 crores of external capital (30%-50% of the existing net worth of the HFCs), to grow at a CAGR of 18%-20% for the next three years at internal capital generation levels, of 15%-16% and at gearing levels of 8.5-9 times.