According to ICRA estimates, the total housing credit outstanding in India as on March 31, 2014 was over Rs. 9.0 trillion as against Rs. 7.5 trillion as on March 31, 2013, indicating a growth of 20% in 2013-14 as against 19% growth in previous financial year. Consequently, Mortgage penetration levels (mortgage loans as a percentage of GDP) in India, increased to 8% as on March 31, 2014 vis-a-vis 7.6% as on March 31, 2013.
Chart: Trend in Housing Credit as a % of GDP and Growth Rates
As for the outlook on growth, the report added that Housing credit is expected to at similar pace of 19-21% in 2014-15 and pick up thereafter. Consequently, mortgage penetration could increase to double digit levels by March 2018.
The reported added that despite a high interest rate scenario and difficult operating environment, HFCs have been able to report good asset quality indicators with a Gross NPA percentage at 0.73% as on March 31, 2014. As per ICRAs estimates, Gross NPA% for HFCs are expected to remain range bound between 0.7% - 1% over the medium term.
In ICRAs estimates, the gearing levels of HFCs increased from 7.3 times as on March 31, 2013 to 7.7 times as on March 31, 2014 owing to incremental credit growth being funded mostly out of fresh borrowings. Vibha Batra, Co Head Financial sector ratings added that If HFCs were to grow at an annual 20-22% over the next five years, they would, in ICRAs estimates, need Tier I capital of around Rs. 800 billion, of which around Rs. 500-550 billion could come from internal capital generation; the rest would have to be raised from external sources.
The reported also added that, the profitability indicators for HFCs in 2013-14 have been largely stable (Return on Assets of 2.29% for 2013-14) supported by stable net interest margins and operating/ credit costs. As for the outlook for 2014-15, stable net interest margins , some rise in credit provisions and rise in effective tax rate owing to change in regulations could lead to a 30-40 bps decline in Return on Assets (1.8-2.1%) and 100-150 bps decline in Return on Equity (16-18% for 2014-15).
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