Gross NPAs Of Housing Finance Companies For Home Loans Segment To Increase In FY20

New Delhi: The non performing assets (NPAs) of housing finance comapneis (HFCs) for home loan segment are expected to increase to 1.1 – 1.3 percent over the medium term from the current level of 1 percent at gross levels.

The NPAs of HFC for construction finance segment is expected to increase to 1.4 – 1.8 percent over the medium term at gross level due to tight liquidity faced by some developers where projects are delayed, said the LIC Housing Finance in its annual report for 2019-19 fiscal.

The housing credit growth in the country for 2019-20 financial year is likely to reach 14 – 16 percent. It is based on the assumption that liquidity conditions in the market are taken care of.

‘Dummy borrowing’ and fudging of documents by real estate developers in affordable housing segment in certain cased has impacted the HFCs in recent times, the report notes. Other stress points in the HFC market include excessive lending to low income, non-salaried borrowers with unpredictable cash flows. The demonetization has led to slump in rural economy and that continues to be a threat for the HFCs. 

The implementation of Goods & Services Tax has dented the earning capabilities of non-salaried, low-income borrowers which again is a stress point for HFCs.

The report also notes that lower liquidity since September 2018 has forced HFCs to decrease their loan disbursements and meet a decent portion of their fund requirements by portfolio sell-down route. This has resulted in banks availing of this opportunity to increase their portfolios.