Indian housing finance companies (HFCs) are likely to face worsening of asset quality this year, with about 30% of their portfolios falling within the regulator-approved moratorium as of end-May, rating agency ICRA said on Friday.
ICRA said gross non-performing assets (GNPA) in the housing segment could increase 2.5-3% in the fiscal year through March 2021 from an estimated 1.7%, as of March this year. In the non-housing segment, the GNPA could be higher at 3-4.5% by the end of fiscal year 2021 from 2.5% at the end of this fiscal year, the rating agency said.
"While home loans are expected to show higher resilience on the asset quality front vis-à-vis other asset classes owing to their secured nature and majority also being self-occupied, the loss of income for borrowers could lead to an increase in the GNPA in the housing loan segment as well," Supreeta Nijjar, Vice-President, Financial Sector Ratings at ICRA said.
The Reserve Bank of India in two moves allowed all financial institutions to offer a six-month moratorium to borrowers on term loans to help tide over the difficulties due to the national lockdown imposed on March 25.
The rating agency, however, noted that lifetime losses may remain under control for the housing finance companies.
"The lifetime credit losses for the HFCs could be an interplay of factors such as the duration for revival of the borrowers' income levels, borrowers' emotional attachment to the property, and whether the properties are self-occupied or under construction," Nijjar said.
"Overall, the lifetime losses might still be the lowest in this asset class," she added.