Affordable Housing Loan Defaults Surge To 7.2%
Feeling the effects of economic disruption from the second wave of the Covid-19 pandemic, delinquencies – 30-day plus dues – for affordable housing finance companies (AHFCs) shot up to 7.2 per cent in June, from 5.1 per cent in March.
Rating agency ICRA said the asset quality had already deteriorated in the aftermath of the first wave of the pandemic in 2020. The collections for these housing finance companies (HFCs) were impacted due to stricter lockdowns across various states in the first quarter (Q1) of 2021-22 (FY22).
Also, unlike the moratorium and restrictions on the bucket movement available in Q1 of 2020-21 (FY21), there were no such dispensations this time round. The 30-day plus dues were at 3.2 per cent in March 2020. Delinquencies in 90-day plus dues – a threshold to treat loans as non-performing assets (NPAs) – remained under control in Q1FY22. NPAs rose marginally to 1.6 per cent in June, from 1.3 per cent in March.
The rating agency said over the last two fiscal years, AHFCs have strengthened their balance sheets with higher provision covers (including management overlays for Covid) across various buckets. Also, the overall restructuring on the portfolio has been limited (mostly less than 2 per cent) across players. The ultimate losses to lenders could be limited, given the secured nature of loans.
The write-offs have historically been low for these entities (average of 0.5 per cent of assets over 2016-17 to FY21). Referring to the growth pattern of AHFCs, ICRA said the total loan book of new players in the affordable housing space expanded 10 per cent year-on-year to Rs 60,468 crore as on June 30. This pace of growth is much lower than the last five-year average of 24 per cent. At this size, it is about 5 per cent of the overall HFC loan book.
The long-term growth outlook for affordable housing credit remains positive, supported by a favourable demographic profile, under-penetrated market, tax sops, and government thrust on ‘Housing for All’. The access to adequate funding would be critical for these AHFCs to scale up, added ICRA.