8-10% Growth expected in Housing Finance Companies in Financial Year 2022

Housing Finance Companies

We have recently stepped into a new financial year. The year 2020 saw the decline of various economic sectors. But it is safe to note that many sectors have recovered from the crisis. Among them, the home loans sector has seen particularly significant growth.

The demand for housing loans has risen over the last two quarters of the previous financial year. As such, recent reports suggest that Housing Finance Companies, in all probability, will see a growth rate of 6-8% this year and a further 8-10% in the financial year of 2021-22. Reports also recommend the growth of the Housing Finance Firms and owe its credit to the renewed demand for housing credit in the market.

How will Growth happen in the Housing Finance sector in 2022?

ICRA ratings suggest that most of the HFCs have achieved almost a pre-covid level of expenditure. They are now looking to further increase their disbursement during the fourth quarter of the financial year 2021. The recorded portfolio growth of the HFCs in the first nine months of 2021 was 4.3% from 6% of the previous year. So, the success of these companies is already quite noticeable.

However, according to the vice president of ICRA, the profit of the HFCs will remain moderate despite their growth. He says that the recorded GNPAs of the HFCs are higher than in the previous years. During the year 2020, the people faced significant economic stress. As a result, HFCs have witnessed an increase in overdue. The fact is evident from the rise of GNPAs of the HFCs. December 31, 2020, saw an overall GNPA of 2.7 from the 2.4 recorded on March 31, 2020. According to the vice president of ICRA, they are likely to remain inflated during the financial year 2021-22. Therefore, even though they are experiencing growth, their profits might remain low.

While that may be the case, vice president Sachin Sachdeva believes that healthy provision coverage can keep the HFCs' profitability intact. However, the surge of new covid-19 infections and the inevitable lockdowns of certain areas can pose a threat. They are likely to test the asset protection capabilities of the HFCs.

Summing it up

The reports suggest that the HFCs have maintained decent on-balance sheet liquidity. They have also lessened their dependence on various short-term funding sources and have significantly improved their asset-liability mismatches. If they can keep said liquidity, it will likely enhance their situation further in 2022.