Home Loan Business Grows 13% In Fy10 Over 10% In Previous Year
HOUSING finance companies are doing better than banks in mortgage
, both in terms of growth and asset quality, according to a report by credit rating agency ICRA.According to the report, housing finance companies have increased their market share and would need to more than double their capital to meet 20% growth in loans every year.
According to the ICRA report, the mortgage business has seen a revival with home loans growing 13% in 2009-10 from 10% in the previous fiscal, partly on the strength of an improved operating environment and expectations of appreciation in property prices, and partly on account of attractive interest rate scheme offered by both banks and HFCs.
But one weakness of the housing finance companies was their high reliance on borrowed funds which exposes them to risks arising out of assets-liability mismatches. Many HFCs have tried to diversify funding by increasing share of fixed deposits. However, despite these initiatives, HFCs are likely to remain reliant on wholesale funding sources, and as a result, any prolonged tightness in liquidity at the system level could affect their cost of funds, and hence, their competitive position, ICRA said.
According to ICRAs estimates, outstanding home loans as on March 31, 2010, stood at Rs 431,300 crore up from Rs 382,900 crore as on March 2009, indicating a growth of 13%. The housing loan portfolios of HFCs as a whole reported a growth of 21% during 2009-10 higher than the 10% growth reported by scheduled commercial banks (SCBs). With that, the share of HFCs in the mortgage market increased to 31% as on March 31, 2010, from 29% as on March 31, 2009, the report said.
According to ICRA, the share of HFCs could increase further, considering their dedicated and focused approach, relatively superior levels of customer service and entering of some new players in the market, which are likely to grow.
The rating agency has pointed out that housing finance companies have done better than banks in controlling non-performing assets. During 2009-10, while Gross NPAs of HFCs increased by 17%, their Gross NPA percentage remained stable with the growth in the loan portfolio having been correspondingly high. The asset quality indicators of HFCs are also superior to that of the top five PSBs in the housing loan segment. While the Gross NPA percentage for HFCs stood at 0.9% as on march 31, 2010, the consolidated Gross NPA percentage of the top five PSBs in the Indian housing finance market was at 2.6% as on the same date, the report said.
Courtesy by BS dtd: June 17, 2010
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