Even as the number of HFCs (housing finance companies) has increased in the market, the share of housing loans in the overall HFC portfolio has been declining owing to the higher pace of growth of non-housing loans.

An ICRA report covering various portfolio cuts of 28 HFCs, which account for over 75 per cent of the overall housing loan portfolio of HFCs as on March 31, 2017, revealed that unlike their larger counterparts, the non-housing loan books of small HFCs largely consists of loans against property (LAP), which accounted for 25 per cent of the total loan book as on March 31, 2017, compared with 14 per cent for all HFCs.

However, for the new HFCs operating in the affordable segment, the share of home loans at 83 per cent as on March 31, 2017, is significantly higher than all HFCs.

“The housing loan portfolios of HFCs remain geographically concentrated with Maharashtra, Delhi/NCR, Tamil Nadu and Karnataka accounting for 61 per cent of the portfolio as on March 31, 2017, driven by the volumes in the mega cities of Mumbai and the metropolitan region, Delhi, and surrounding cities of Noida and Gurgaon, Chennai, and Bengaluru respectively,” said Supreeta Nijjar, Vice-President, Financial Sector Ratings, ICRA.

Maharashtra shines in the affordable segment.

Home loan penetration in the affordable segment continues to be high in western India, with Maharashtra alone accounting for half the portfolio of all financiers in the ‘affordable’ segment taken together, and the top three states (Gujarat and Rajasthan, apart from Maharashtra) comprising 64 per cent of the total.

Though some of the larger HFCs are able to compete with banks in the salaried home loan segment, most of the HFCs target self-employed customer segments or the affordable housing segment to optimise their yields and also capitalise on the higher growth potential.

Further, with the affordable segment and small HFCs growing at a faster pace than the overall HFC industry, ICRA expects the share of the self-employed segment to increase further.

Overall, while the ticket sizes for all HFCs was around ₹24 lakh as on March 31, 2107, HFCs operating in the affordable segment had significantly lower ticket sizes, at ₹10 lakh (affordable – new) and ₹12 lakh (affordable – all).

Nearly 60 per cent of the home loan portfolio for all HFCs taken together, as on March 31, 2017 was in the ₹10-15 lakh bracket.

Meanwhile, the increasing number of new entrants in the housing finance market, coupled with the focus of existing players, has increased the competitive intensity in the industry, leading to the dilution in lending norms, pointed out ICRA.

An increase in the share of riskier sub-segments such as non-housing loans, self-employed and affordable housing in the overall portfolio of HFCs, could impact the asset quality indicators of HFCs. These may get partly mitigated by the strong monitoring and control processes of HFCs, borrowers’ own equity in the properties, and the large proportion of properties being financed for self-occupation, especially in the affordable segment, said Nijjar.

Accordingly, ICRA expects HFCs’ gross NPAs to increase from 0.8 per cent as on June 2017, but remain within 1 and 1.3 per cent for FY2018.

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