Higher Provisioning Likely To Hit Housing Finance Cos Tough
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Higher provisioning likely to hit housing finance cos tough

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The National Housing Bank (NHB) has increased standard assets provisioning on retail home loans from 0.1% to 0.4% that will impact the earnings of housing finance companies.

This was indicated by NHB executive director RV Verma, who was speaking on the sidelines of a seminar on inclusive growth by Skoch. He said NHB has not yet finalised the effective date of the new norm.

For the country's largest home loan provider, HDFC, the impact would be of 140 crore. HDFC officials said they have already made an excess provision of 310 crore on their books, and therefore, the new norms will not impact them.

As of now, the provision for non-retail loans like developers, loan against property and top-up loans is at 0.40%. Following the increase, housing finance companies will be at par with banks.

Meanwhile, Mr Verma said that high property prices and increase in interest rates have affected demand for home loans. He indicated that slack in demand has affected builders as well.

"The inventory of housing projects is piling up," he said. When asked if NHB would be looking at reviewing benchmark rates at which it provides cheaper finance to housing finance companies, he said there was no immediate plan to increase rates now.

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