housing finance companies (HFCs) are likely to see a growth of 8-10 per cent in FY22, helped by growth in economic and higher demand, said a report. In the first quarter of the current financial year, HFC On-book portfolio registers zero sequential growth as second wave of COVID-19 Rating agency Ratings said in a report released on Monday that their disbursement and collection efficiency (CE) has been impacted.

However, collection efficiency started to bounce back by the end of June 2021 and further improved in the second quarter of FY 2022.

“The healthy demand in the industry, rising levels of economic activity and increasing vaccination in the country is expected to lead to a steady increase in distribution and improvement in CE in FY22,” the agency said in the report.

Its Vice President and Sector Head (Financial Sector Ratings) Sachin Sachdeva The total on-book portfolio of HFCs in India is estimated to be Rs 11 lakh crore as on June 30, 2021, which includes Home Loan (HL), Loan Against Property (LAP), Construction Finance (CF) and Lease Rental . Discounting (LRD).

COVID-19-induced disruptions limit portfolio growth to 6 per cent in FY21

“Nevertheless, despite zero sequential growth in the first quarter of FY22, the above favorable factors provide hope for better growth prospects in FY22 with an estimated growth rate of 8-10 per cent,” Sachdeva said.

The asset quality metrics of HFCs weakened significantly in Q1 FY2022 due to local lockdowns imposed by various States/Union Territories (UTs) due to the second wave, which affected the cash flow of borrowers and hence collection efficiency, the report said. Impressed.

The spurt in overdues was sharpest in recent days, as borrower level liquidity had risen in the absence of loan moratorium, it said.

The Gross Non-Performing Assets (GNPA) of HFCs increased to 3.6 per cent as on June 30, 2021, from 2.9 per cent as on March 31, 2021 (2.3 per cent as on March 31, 2020). The agency said that although asset quality declined across sectors, construction finance suffered the most, followed by LAP and HL.

It expects an increase of 40-70 basis points in GNPAs (net of recovery and write-offs) by March 31, 2022, from GNPAs by March 31, 2021, assuming there are no further COVID-19 induced lockdowns .

“Despite improving business for the rest of FY22, asset quality pressures will keep credit costs high and result in lower profitability for HFCs in FY22,” Sachdeva said.

He expects the pre-tax return on average managed assets (PBT per cent) for FY2022 likely to be similar to FY21 levels (1.9-2 per cent).