Continued growth momentum in housing loans coupled with an expected revival in developer loans is likely to lead to 12-14% AUM growth for HFCs.
“Segment-wise, while the share of wholesale financing of HFCs is expected to rise in the medium term, it is broadly expected to remain in the range of 10-12% as financiers embark on cautious growth. Driven by an up-cycle in residential real estate market and waning wholesale credit stress, pool of stressed wholesale assets as a proportion to HFCs net-worth is expected to improve to roughly 10% by March 2024,’’ according to a CareEdge report.
While NIMs may be marginally impacted; profitability during FY24 is expected to remain robust supported by portfolio growth with comfortable asset quality and receding credit costs, it said.
The downside risks to this outlook are regulatory changes, tighter liquidity, a continuation of elevated interest rates, delayed resolutions/ recoveries with respect to wholesale loans and competition from banks.
In sync with a rebound in the residential real estate market, retail loans started witnessing an uptick from FY22. Consequently, the AUM growth has been led by retailisation. During FY23, the overall AUM of HFCs grew by roughly 9% with the housing segment growing by 13% while the non-housing portfolio including the developer finance book contracted marginally.
| The total outstanding portfolio of HFCs as of March 31, 2023, stood at Rs 7.4 lakh crore (excluding HDFC Ltd) of which housing loans comprised Rs. 5.5 lakh crore |
Wholesale book
The share of builder loans has shown a declining trend while retail loans have been rising in the overall portfolio mix. Post 2019 developer and NBFC/ HFC crisis, developer finance portfolios of HFCs witnessed stress thereby resulting in conscious curtailment. Apart from issues in developer financing, the growth in retail loans was also contributed by higher disbursements post regulatory guidelines on the principal business of HFCs.
However, going forward, in the backdrop of strong residential sales, a shrinking pool of stressed developers and progressive resolutions/ recoveries within the developer financing book, the share of developer financing is expected to gradually pick up in the medium term.
| While NIMs may be marginally impacted; profitability during FY24 is expected to remain robust supported by portfolio growth with comfortable asset quality and receding credit costs. |
