No end of tunnel for HFCs, FY20 looks as difficult as FY19: Report

The liquidity crisis has crimped credit growth for housing finance companies (HFCs) and is unlikely to improve much in FY20, even as the weak external environment will put a pressure on asset quality, warns a report.

HFCs are expected to report a 13-15 percent credit growth in FY19, which will inch up to 14-16 percent in next fiscal year, ratings agency ICRA has said in a weekend report.

Aggravating the difficulties will be a likely pressure on the asset quality front due to the weak operating environment, it warned.

"Discussions with some HFCs reveals that their stock of repossessed assets has also increased, due to the lower saleability of those assets leading to an elongated recovery time," it explained.

Gross non-performing assets (NPAs) of the home loan segment will increase to up to 1.3 per cent in the medium term from the present 1 per cent levels, it said.

If we include project loans, their overall NPAs will shoot up to 1.8 per cent in the medium term from the present 1.4 percent, it said.

The ongoing troubles will result in a narrowing of margins and accordingly, a moderation of profit levels to 14 per cent levels in FY19 from 18 per cent in the year-ago period, it said, adding it expects bottomline to be at the same levels in FY20 as well.

It can be noted that the mortgage finance sector has been considered as one of the safest bets for financiers in the last few years, as the segment has been largely resilient.

(with news agency inputs)