Indian housing finance market to grow at 19 - 21% in 2015: Icra

The total housing credit outstanding in India as on 31 March 2014 was over Rs9.0 trillion (Rs9 lakh crore) as against Rs7.5 trillion as on 31 March 2013, indicating a growth of 20 per centg in 2013-14,  up from the 19 per cent growth in previous financial year.

According to ICRA's estimates in a new report,  mortgage penetration levels (mortgage loans as a percentage of GDP) in India, increased to 8 per cent as on 31 March 2014 vis-a-vis 7.6 per cent as on 31 March 2013. 

As for the outlook on growth, the report added housing credit is expected to grow at a similar pace of 19-21 per cent pace in 2014-15 and pick up thereafter. Consequently, mortgage penetration could increase to double-digit levels by March 2018.

The reported added that "despite 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 per cent as on 31 March 2014."  

According to ICRA's estimates, gross NPA percentage for housing finance companies (HFCs) are expected to remain range bound between 0.7 per cent - 1 per cent over the medium term.

ICRA estimates the gearing levels of HFCs increased from 7.3 times as on 31 March 013 to 7.7 times as on 31 March 2014 owing to incremental credit growth being funded mostly out of fresh borrowings.

Vibha Batra, co head, financial sector ratings, says ''If HFCs were to grow at an annual 20-22 per cent over the next five years, they would, in ICRA's estimates, need Tier I capital of around Rs800 billion, of which around Rs500-550 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 per cent 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 per cent) and 100-150 bps decline in return on equity (16-18 per cent for 2014-15).