Several extremely positive steps have been taken amidst lockdown by the central bank to boost liquidity, and to help revive demand and assist in recovering the weakened economy. Indian housing finance companies (HFCs) have raised about INR 34,000 crore of funds through the debt market route from National Housing Bank (NHB) during April – May 2020.
According to a recent report from ICRA, housing finance companies are expected to maintain requisite liquidity profiles to meet their debt obligations even with lower level (50-80 percent) collection. Further rating agency mentioned that the weighted average on balance sheet cash and liquid investment remained around 7 percent of assets under management (AUM) as on March 2020 and 12 percent inclusive of sanctioned funds by NHB.
At current liquidity levels housing finance companies are likely to cover about two-months of their debt repayment, while dispensation of sanctioned funds could help HFCs to meet their debt obligation for three months.
During lockdown around 31 percent of housing finance companies’ portfolio was under a moratorium for 2-3 months as on April 30, 2020. Surprisingly, most of the HFCs have not applied for a moratorium from their respective lenders.
The housing finance companies operating in the affordable housing segment have a higher proportion of portfolio opted for a moratorium. Most of these portfolios are marginal borrower profiles, which may have been affected more during the lockdown. HFCs of the affordable housing segment has sufficient liquidity to support their debt obligation commitments until August 2020.
The portfolio which is not under moratorium is expected to bolster liquidity inflows for housing finance companies during the lockdown. On the other hand, RBI’s extension of moratorium till August 31, 2020, could prompt an expansion in the portion of the portfolio under moratorium consequently lowering the liquidity cover.
As per the rating agency, it is estimated that around INR 2.9 – INR 3.2 lakh crore are maturing debt of housing finance companies for FY2021. Most of the experts are suggesting, that a steady fund flow is required by housing finance companies to meet their huge debt obligations, and that this could be met through refinancing by banks and primary issuances in debt markets. Which route is finally taken,