Steady growth expected for housing finance companies' retail portfolios

Hyderabad: The housing finance sector is benefitting from strong macro drivers despite high-interest rates, as indicated by robust residential sales and launches.

Housing finance companies (HFCs) are experiencing healthy growth in Assets Under Management (AUM), thanks to solid demand and strong balance sheets. The retail portfolio is expected to grow steadily, while stress in the wholesale portfolio is gradually decreasing. Asset quality concerns for HFCs are diminishing due to a decline in fresh slippages and improvements in the wholesale portfolio. Although Net Interest Margins (NIM) are under pressure, overall profitability is predicted to rise due to improving asset quality.

According to Mr Gaurav Dixit, Director of BFSI Rating at CareEdge Ratings, HFCs are likely to witness 12-14% growth in AUM, driven by continued momentum in housing loans and a potential revival in developer loans. The share of wholesale financing is expected to increase moderately, staying within the 10-12% range as companies pursue cautious growth. The proportion of stressed wholesale assets to HFCs' net worth is expected to improve to around 10% by March 2024, supported by an upswing in the residential real estate market and easing wholesale credit stress.

While net interest margins might be slightly impacted, FY24 is anticipated to have robust profitability due to portfolio growth, healthy asset quality, and decreasing credit costs.