Competition, Liberal Norms To Push Up NPA Level In Home-loan Segment

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Mumbai, Dec 18: : Credit rating agency Icra is foreseeing higher non-performing assets (NPA) in the domestic housing finance segment since lending norms have become more liberal, competition has forced lending through outside channels where controls may not be strong, and property prices in certain locations are on the rise.

The overall gross NPA proportion for individual housing portfolios is 1-1.5 per cent for the older players and 0.25-0.5 per cent for the newer players, However, the lower figure for the newer players does not necessarily reflect a better credit quality as the seasoning of their portfolios is much lower when compared with the older players.

According to Icra, the NPA generation rate (fresh accretion to NPA/opening principal outstanding) has varied between 0.2 per cent to 0.6 per cent per annum during the last three years for the older players, but has shown an increasing trend.

The NPA generation rate for the newer players has been higher at 0.5-0.7 per cent in fiscal 2003. The difference in the NPA generation rate may be partly because of the different seasoning levels in the portfolios of the new and old players and partly because of the deteriorating asset quality for more recent originations, says Icra.

Icra expects the share of banks in the overall mortgage market to rise in the medium term, even as the lack of economies of scale is likely to marginalise some of the smaller banking and housing finance companies (HFCs) or force them to exit the business altogether.

The rating agency believes that the smaller players which would be able to sustain growth would either bank subsidiaries(supported by either parent banks or niche/regional players operating on smaller volumes.

Icra estimate that the mortgage loans outstanding at the end of 2002-033 fiscal were above Rs 80,000 crore and quadrupled in the four years till then. The loan outstanding includes commercial property and corporate mortgage loans, which are estimated at Rs 10,000 crore.

While in terms of outstanding loans, HFCs still the lead the bank marginally, in terms of individual loans, banks have surpassed the HFCs.

There has been a significant change in the structure of the mortgage industry in the last three years, with banks gaining market share in the direct housing finance segment.

The share of the commercial banks in direct housing finance rose to 57 per cent in fiscal 2003 from 27 per cent in fiscal 2000.