CARE warns on NPAs emergency

“This is an alarming trend as such loans tend to turn bad compared to those given to individuals. Individuals,who borrow to buy their own houses are less likely to default compared to non-individuals,” Dogra said here.

According to CARE’s estimates,the proportion of non individual housing loans rose from 23 -24 per cent of the total loan book of HFCs at the end of FY 07 to around 29 per cent at end of FY 09.

“There is a clear trend emerging that the pie of non individual housing loans is steadily becoming larger in the total loan portfolio of HFCs,” Dogra said.

CARE said that the adequate capitalisation of Housing Finance Companies has helped curtail the impact of rising Non Performing Assets (NPA) of HFCs,which is a result of aggressive expansion of their loan portfolio.

The gross NPA levels of HFCs stood close to one per cent and net NPA around 0.5 per cent in the nine months ended December,2009,Dogra said.

According to CARE,credit growth of HFCs during FY 10 was around 17-18 per cent. The growth is expected to be on the similar lines for FY 2011 as well.

On the profitability front,the profit after tax for HFCs rose by around 0.5 per cent on an average from 18.75 per cent in FY 09 to 19.28 per cent in the nine months ended December with the industry managing to control operating expenses,Dogra said.

“The FY 10 was a double whammy for HFCs with competitive pressures mounting towards reduction in the lending rates and at the same time banks with lower borrowing cost enjoying the edge to their benefit,” Dogra said.

Also,the interest margin of HFCs is likely to improve with the rise in lending rates in the period ahead,he said.