Stock markets in India are presently trading marginally higher. Sectoral indices are trading on a mixed note with stocks in the IT sector and banking sector witnessing maximum buying interest. Realty stocks are trading in the red.
The BSE Sensex is trading up 123 points (up 0.4%) and the NSE Nifty is trading up 32 points (up 0.3%). The BSE Mid Cap index is trading down by 0.1%, while the BSE Small Cap index is trading down by 0.4%. The rupee is trading at 63.97 to the US dollar.
In the news from the finance sector, asset quality in the housing loan space, especially that of affordable housing segment, has deteriorated during FY17.
As per the monthly report by the Reserve Bank of India (RBI), a majority of the slippages for housing finance companies (HFCs) have taken place in the affordable home loan slab of up to Rs 0.2 million. The bad loan ratio in this segment shot up by 0.6% in FY17 to 10.4%. Further, HFCs bore the major brunt with the bad loan ratio jumping by 2.5% to 8.6% by the end of FY17, as can be seen in the chart below:
As per India Rating and Research, affordable housing finance is estimated to be a Rs 6 trillion business opportunity by 2022 and will be the principal growth driver for home loans.
Note that HFCs are likely to be the major beneficiaries of the affordable housing boom in India. Though banks with a share of more than 60% are the biggest players in the home loan market, it’s the housing finance companies (HFCs) that have established their presence in niche markets, such as small ticket-size loans, and the non-salaried or self-employed segment in small towns and cities.
That said, one needs to be watchful of the slippages and bad loans for these companies. It’s because not all but the ones that balance growth with asset quality through stringent risk management will be wealth creators in the long run.
