Team News Riveting
Amid conditions of business de-growth for the housing finance companies (HFCs)s, the affordable housing finance companies (AHFC)have continued to grow, albeit at a slower pace.
As per the latest ICRA report, the total portfolio of the new AHFCs in the affordable housing space stood at Rs 55,061 crore as on September 30, 2020 and registered a moderate year-on-year (Y-o-Y) growth of 9 per cent compared to sector’s overall negative growth. Although the growth is much lower than the 3-year average of over 30 per cent, as per the ratings agency.
The long-term growth outlook for AHFC remains favourable, supported by several factors. At this current size, AHFCs accounted for around 5 per cent of the overall Indian HFC market as on September 30, 2020.
“Given the target borrower profile (largely self-employed and middle-to-low-income borrowers), the impact of the pandemic on earnings and savings could be high, leading to the deferment of home purchases for some time by such borrowers. Thus, the growth numbers for FY2021 could be much lower at 8-10 per cent,” Ms. Manushree Saggar, Vice President and Head – Financial Sector Ratings of ICRA, said.
However, the long-term growth outlook for the sector remains positive given the large underserved market, favourable demographic profile, housing shortage and Government support in the form of tax sops and subsidies. “We expect that the growth would pick up to 12-15 per cent in FY2022,” Ms Saggar said, adding that over the last decade, several new players have emerged in the housing finance space, focusing primarily on the affordable housing segment. The property cost in this segment is usually below Rs. 20 lakh and borrowers have relatively low income and usually do not have any formal income proof.
Earlier, most large players did not cater to this segment. However, over the last couple of years, even large HFCs have set up dedicated verticals focused on the affordable housing segment. While banks are also present in the smaller-ticket home loan market, their lending to the economically weaker section (EWS) and low-income group (LIG) segments and borrowers without any formal income proof is limited. These specialised HFCs are trying to tap this underserved market segment.
