On The Slow Lane: NHB Grants Approval To Just 7 Housing Finance Firms In FY19

Registration of housing finance companies (HFCs) hit the slow lane in 2018-19, with only seven companies being granted certificate of registration (CoR) by the National Housing Bank (NHB) against 13 in 2017-18 and 11 in 2016-17.

This comes in the backdrop of the turmoil and skewed market sentiments in the non-banking finance company (NBFC) space, including housing finance company (HFC), post debt default by IL&FS triggering liquidity crunch and slowdown in disbursements and DHFL then showing signs of imminent stress.

According to NHB’s latest annual report (for the year July 1, 2018 to June 30, 2019), the HFCs that were granted CoR were: Easy Home Finance Ltd, Sasvitha Home Finance Pvt Ltd, Varashakti Housing Finance Pvt Ltd, Capital India Home Loans Ltd, Nanayasurabhi Affordable Housing Finance Ltd, Indie Homefin Pvt Ltd and Aham Housing Finance Pvt Ltd.

In the previous year, NHB had granted CoR to 13 HFCs, including those backed by large corporates and financial intermediaries, such as Adani Housing Finance Pvt Ltd, Hero Housing Finance Ltd, JM Financial Home Loans Ltd, Piramal Housing Finance Ltd and Satin Housing Finance Ltd.

Fewer HFC registrations in 2018-19 also comes at a time when penetration of mortgages as a percent of nominal GDP growth is very low in India at 10 per cent vis-a-vis 20 per cent for Thailand, 26 per cent for China, 32 per cent for Malaysia, 50 per cent for the US and 66 per cent for the UK.

As of June-end 2019, the total number of HFCs registered with NHB stood at 101 against 96 as of June-end 2018 and 85 as of June-end 2017.

“..The cost of borrowings for the HFCs has been on the rise. Though the HFCs have more or less retained their market share, the access to funding will determine their growth prospects.

“Many primary lending institutions (PLIs) resorted to securitisation to meet their liquidity requirements. External commercial borrowings also gathered pace, but in a limited way,” the report said.

While the (liquidity) squeeze has subsided, NHB noted that the PLIs complained about high cost of funds. It underscored that the troubles at the NBFCs are asset liability mismatches, where short-term borrowings are used to fund long-term assets.

The report said HFCs have started strengthening their liquidity buffers to meet any sudden market disruptions and near-term debt obligations. Though banks have continued to disburse home loans during the liquidity crisis faced by NBFCs and HFCs, the slow progress of HFCs had an impact on the housing finance growth in the country, it added.

With the liquidity situation now being resolved with different sops and measures, NHB expects NBFCs and HFCs to restart disbursals and housing finance to again pick up pace.