{"id":2507,"date":"2020-06-26T09:50:19","date_gmt":"2020-06-26T09:50:19","guid":{"rendered":"https:\/\/bengalnewstimes.com\/?p=2507"},"modified":"2020-06-26T09:50:19","modified_gmt":"2020-06-26T09:50:19","slug":"asset-quality-pressures-building-in-housing-loan-portfolio-of-hfcs-though-lifetime-losses-may-remain-under-control-icra","status":"publish","type":"post","link":"https:\/\/bengalnewstimes.com\/?p=2507","title":{"rendered":"Asset quality pressures building in housing loan portfolio of HFCs, though lifetime losses may remain under control: ICRA"},"content":{"rendered":"

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\n\tICRA ratings expects the asset quality of housing finance companies HFCs to worsen going forward. As per its\u00a0 recent report\u00a0 based on the aggregated analysis of its rated HFCs,\u00a0 the GNPAs in the housing segment is estimated to increase to 2.5-3.0% in FY2021 from an estimate of 1.7% as on March 2020 (1.4% as on December 31, 2019), whereas those in the non-housing segment could be higher, leading to overall GNPAs of 3.0-4.5% by the end of FY2021 from estimated 2.5% as on FY2020.<\/p>\n

Around 30% of the HFCs\u2019 portfolio is under the moratorium as on May 31, 2020. Given the likely impact on the cashflows of borrowers, there could be some more slippages from these accounts once the moratorium is lifted. As for HFCs in the affordable segment, they have a higher share of portfolio under moratorium owing to the relatively marginal borrower profile, which may have been impacted more during the Covid-19 related lockdown.<\/p>\n

Giving more insights, Supreeta Nijjar, Vice President Financial Sector Ratings, said, \u201cWhile home loans are expected to show higher resilience on the asset quality front vis-\u00e0-vis other asset classes owing to their secured nature and majority also being self-occupied, the loss of income for borrowers could lead to an increase in the gross non-performing assets (GNPA%) in the housing loan segment as well.\u00a0 The impact on borrowers who have availed moratorium, where the fixed obligation to income ratio (FOIR) is higher than 50%, could be more. Even at stable income levels, FOIRs could increase by 20-30% for recent loans extended at higher interest rates ranging between 14% and 18%.\u201d<\/p>\n

Further, the share of the self- employed segment in the housing loan book of housing finance companies (HFCs) increased over the years to 32% as on December 31, 2019 from 25% as on March 31, 2016. This segment was already performing weaker than the salaried segment with the GNPA% in this segment being almost 3 times of the salaried segment as on December 31, 2019, and thus deterioration could be even sharper due the pandemic.<\/p>\n

Further, ICRA notes that the liquidity of repossessed properties could get impacted and lead to an increase in the ultimate losses, especially those that were recently originated and financed at higher loan-to-value (LTV) ratios, in case of a significant correction in the property prices.\u00a0 For portfolio availing moratorium, the LTVs could increase by 6-10% for recently originated loans extended at higher interest rates ranging between 14% and 18%.\u00a0 \u201cNevertheless, the lifetime credit losses for the HFCs could be an interplay of factors such as the duration for revival of the borrowers\u2019 income levels, borrowers\u2019 emotional attachment to the property, and whether the properties are self-occupied or under construction. However, overall, the lifetime losses might still be the lowest in this asset class,\u201d added Ms Nijjar.<\/p>\n<\/div>\n