Housing Finance Companies (HFCs) are likely to witness a growth of 8 to 10% driven by a rise in economic activities and higher demand in fiscal year 2022, ratings agency Icra said in a report released Monday.

By the end of June 2021 the collection efficiency started showing signs of recovery and improved further in the second quarter of the current financial year.

As per Icra, healthy demand in the industry, increasing economic activity and vaccination drive across the country are expected to result in a steady growth in disbursements and collection efficiency in FY22. The disruptions caused by Covid-19 moderated the portfolio growth to 6% in FY 2021, it added.

Further, HFCs asset quality metrics weakened quite sharply in the first quarter of FY 2022, due to the localised lockdowns imposed by various states and Union territories on account of the second wave, which impacted borrowers cash flow and the collection efficiency.

It said that the increase in overdue was the sharpest in the recent past, as borrower level liquidity got stretched in the absence of loan moratorium.

Rising GNPAs

The Gross Non-Performing Assets (GNPAs) of HFCs increased to 3.6% as of June 30,2021 from 2.9% as on March 31, 2021 and 2.3% on March 31,2020. Construction finance was the worst hit followed by loan against property and housing loan. On the other hand, asset quality deteriorated across segments, the agency said.

It expects an increase of 40-70 basis points in the GNPAs by March 31, 2022, from GNPAs as of March 31, 2021, assuming there are no further Covid-19 induced lockdowns.