According to ICRA affordable housing might grow 8-10% in FY21.

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As per Investment Information and Credit Rating Agency (ICRA), the affordable housing finance industry may grow by 8-10% in the financial year 2021. The total AHFC (Affordable Housing Finance) in affordable housing space stood at Rs 55,061 crore as of September 30, 2020, and registered a moderate growth of 9%.

According to Manushree Saggar, vice president and head of ICRA “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%. However, the long-term growth outlook for the sector remains positive given the largely underserved market, favorable 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% in FY2022.”

Now several players have entered the market of housing and are primarily focusing on the affordable segment. The segment mainly consists of property usually ranging below Rs20 lakh. While banks are also present in the small-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.

As for the key parameters, the asset quality indicators for AHFCs registered a marginal improvement with a reported gross NPA% of 3.1% as of September 30, 2020. Nevertheless, the asset quality numbers remained weaker than the industry levels (2.40% as of September 30, 2020), reflecting the inherent weakness associated with the segment.

Manushree also said- “ICRA expects the profitability indicators of these HFCs to be lower with ROAs of 2.2%-2.4% in FY2021, given the expected impact of the pandemic on new business (cost-to-income ratios could remain elevated) as well as the asset quality (higher credit costs). Over the long-term, the ability of companies to improve the operating efficiencies and control the credit costs would be imperative to improve the return indicators,”.

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