Housing finance companies (HFCs) have slowed down theirloandisbursementsandthis can have a spillover impact on both retail home loan borrowers and property developers, said India Ratings and Research.
“Challenges have been facing by housing finance sector, which have led to a contraction in spreads, a rise in funding cost and an increased spotlight on their assetliability mismatches. Such mismatcheshaveresultedinconstrained financing from both marketbased sources (CPs and NCDs) and banks for many players,” the report said.
Accordingto India Ratings, the systemic rise in market borrowings rate has affected the housing loan business and the borrowingcost for somelarge HFCs could be upwards of banks’ marginal cost of fundsbased lending rate (MCLR). “This has led to the shrinking of margins in mid-to- large ticket housing loans, where banks are highly competitive. Furthermore, the ongoing challengesinthe realestate and small andmediumenterprisesegments (loan against property customers) may lead to HFCs reassessing loan growth plans, thereby putting pressure on their margins,” it added.
During FY17 to first half of FY19, to mitigate the margin risk, many HFC players expanded their non-housing books at a significantly higher rate than their pure housing loan books. The increase, India Ratings said, in the proportion of non-housing loanbook couldleadto assetquality pressure amid the current slowdown in disbursement to developers. “In Q3 FY19, housing loan growth moderatedto14% on ayearon-year(y-o-y) basisandto 3.5% on a quarter-on-quarter (q-o-q) basis. The segment has witnessed moderation in growth from the historical compounded annual growth rate (CAGR) of 19% for the last five years. Incrementally, risk perception has increased for low rated HFC lenders, based on the duration of their asset book and funding pro- files,” it added. Additionally, loan disbursement in the fourth quarters ended in September 2018 aver- aged ₹25,000 crore per month for large six HFCs players (based on the preceding four-quarter aver- age). However, following September 2018, per month average disbursement fell to ₹13,500 crore as few large HFCs faced serious challenges.