Housing finance firms’ AUM is seen rising 12-14 per cent in FY24 and FY25 led by continued progress momentum in housing loans coupled with an anticipated revival in developer loans, in line with CareEdge Rankings.
“Whereas the share of wholesale financing of HFCs is anticipated to rise within the medium time period, it’s broadly anticipated to stay within the vary of 10-12 per cent as financiers embark on cautious progress,” mentioned Gaurav Dixit, Director – BFSI Rankings.
The residential actual property sector is experiencing strong demand, backed by robust macroeconomic fundamentals and drivers akin to enhancing affordability, rising urbanization, a low mortgage-to-GDP ratio, beneficial demographics and authorities insurance policies. Shift in post-pandemic client behaviour in direction of a desire for open dwelling areas, premiumization, in addition to different components akin to low-interest charges and stamp responsibility rebates, are additionally supporting progress.
Robust residential gross sales
HFCs’ AUM grew 9 per cent in FY23, with the housing phase rising 13 per cent, whereas the non-housing portfolio, together with developer finance contracted marginally. As of March 2023 (excluding HDFC), HFCs’ excellent portfolio stood at ₹7.4 lakh crore , of which housing loans comprised ₹5.5 lakh crore. As compared, housing loans by banks stood at ₹19.4 lakh crore.
“Within the backdrop of robust residential gross sales, a shrinking pool of careworn builders and progressive resolutions/ recoveries inside the developer financing ebook, the share of developer financing is anticipated to regularly choose up within the medium time period,” CareEdge mentioned, including that the pool of careworn wholesale property as a proportion to HFCs’ web value is anticipated to enhance to roughly 10 per cent by March 2024.
Internet NPA
Internet NPA to web value for HFCs improved from 16.6 per cent to 11.7 per cent. Stage 3 provision cowl ratio, estimated at 42 per cent as of March 2023, is anticipated to stay wholesome within the vary of 44-46 per cent within the close to to medium time period.
Going ahead, lenders are anticipated to undertake a calibrated method between progress and asset high quality. Additional, anticipated rate of interest cuts in FY25 are additionally anticipated to result in downward stress on margins as portfolios reprice sooner vis-a-vis borrowing.
Whereas NIMs could also be marginally impacted, profitability is anticipated to stay strong, supported by portfolio progress, with comfy asset high quality, and receding credit score prices, CareEdge mentioned. It added that it expects return on complete property (ROTA) to be close to or marginally exceed pre-Covid ranges.
Nonetheless, regulatory modifications, tighter liquidity, continuation of elevated rates of interest, delayed resolutions/ recoveries with respect to wholesale loans and competitors from banks could pose draw back dangers.
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