Housing Finance Firms Comfortably Placed to Meet Debt Obligations: Report

Having raised nearly Rs 34,000 crore from the debt market and the National Housing Bank (NHB) in the past two months, housing finance companies (HFCs) are comfortably placed to meet their debt obligations despite lower collections, according to a report.

The total maturing debt of HFCs for 2020-21 is estimated to be Rs 2.9-3.2 lakh crore, of which Rs 1.4 lakh crore is accounted for by debt markets, rating agency ICRA said in the report.

"As HFCs raised approximately Rs 34,000 crore through debt market route and from NHB during April and May 2020, it is expected that most of the HFCs will maintain an adequate liquidity profile for meeting their debt obligations even with lower collection levels (50-80 per cent ) in the portfolio," ICRA Vice-President (Financial Sector Ratings) Supreeta Nijjar said in the report.

The findings are based on the analysis of the rating agency-rated HFCs accounting for around 90 per cent of the sectoral asset under management (AUM).

The findings have indicated that HFCs weighted average on balance sheet cash and liquid investments stood at about seven per cent of the AUM as on March 31, 2020, and at 12 per cent, including the sanctioned funding lines.

The available liquidity is sufficient and could typically cover about two months of debt repayments (excluding securitisation and direct assignment outflows) of most HFCs, while access to the sanctioned funding lines could enhance the cover to three months (assuming no additional collections from advances), Nijjar said.

Around 31 per cent of the HFCs' portfolio was under moratorium for two-three months as on April 30, 2020. Further, most of the HFCs have not applied for a moratorium from their lenders.

"While the HFCs in the affordable housing segment have a higher share of portfolio under moratorium owing to the relatively marginal borrower profile, which may have been impacted more during the lockdown, they are carrying adequate liquidity to service their debt obligations till August 2020," she said.

The rating agency expects the inflows from advances not under moratorium to likely support the liquidity profile of HFCs.

However, the Reserve Bank of India's extension of the moratorium till August 31 could lead to an increase in the share of portfolio under moratorium, thereby reducing the liquidity cover, it said.