Affordable home loan defaults reach 7.2%, according to Icra rating agency


Feeling the effects of the economic disruption of the second wave of the Covid-19 pandemic, defaults – 30 days plus dues – for affordable housing finance companies (AHFCs) soared to 7.2% in June, against 5.1% in March.

Credit rating agency ICRA said asset quality had already deteriorated in the aftermath of the first wave of the pandemic in 2020. Collections from these housing finance companies (HFCs) have been affected due to more lockdowns. strict in various states in the first quarter (Q1) of 2021-22 (FY22).

Also, unlike the moratorium and bucket movement restrictions available in the first quarter of 2020-21 (FY21), there were no such waivers this time around. Contributions of 30 days and more were 3.2% in March 2020.

However, 90-day defaults plus contributions – a threshold for treating loans as non-performing assets (NPAs) – remained under control in Q1FY22. NPAs edged up to 1.6% in June, from 1.3% in March.

The rating agency said that over the past two years, AHFCs have strengthened their balance sheets with higher provision hedges (including management overlays for Covid) in various compartments.

In addition, overall portfolio restructuring has been limited (mainly less than 2 percent) among players.

The ultimate losses to lenders could be limited, given the secured nature of the loans.

Write-offs have been historically low for these entities (average of 0.5% of assets from 2016-2017 to FY21).

Referring to AHFC’s growth model, ICRA said the total loan portfolio of new affordable housing players increased 10% year-on-year to Rs 60,468 crore as of June 30.

This growth rate is well below the five-year average of 24 percent.

At this size, it represents around 5 percent of the overall HFC loan portfolio.

The long-term growth outlook for affordable housing credit remains positive, supported by a favorable demographic profile, an under-penetrated market, fiscal measures and the government’s push for “housing for all”.

Access to adequate funding would be essential for these AHFCs to thrive, CIFAR added.

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