Goods and services tax is seems to be affecting the growth in Loan Against Property (LAP) portfolio. The growth in LAP portfolio of major financiers slowed down to 17 per cent in FY2017, down from 30 per cent in FY2016 respectively, according to an ICRA report.
ICRA expects delinquencies to rise by 50-100 basis points by March 2018 from current levels.
The total disbursements in FY2017, for the entities analysed, remained flat as compared to that during FY2016. In comparison, the disbursements had increased by 36 per cent and 43 per cent in FY2016 and FY2015 respectively.
Disbursements had dipped immediately after demonetisation but normalised towards the end of Q4 FY2017. The dip in fresh disbursements contributed to the lower growth rate in the loan book.
ICRA added that average incremental lending rate has been gradually decreasing from around 14.0 per cent in FY2013 to around 12.0 per cent in FY2017.
This reduction in lending rates is a function of both the increasingly competitive scenario in this segment — that has eaten into the spreads of the financiers — and the reducing interest rate scenario currently prevalent in the economy. As a result, the lending spreads of financiers has declined by almost 2.0 per cent from the peak levels.
Loans against residential properties continue to form a dominant part of lenders’ portfolio (with around 56 per cent share) followed by loans against commercial properties (with around 37 per cent share), mixed usage properties (with around 3.5 per cent share) and industrial properties (with around 3.5 per cent share).
ICRA carried out the analysis on the LAP book of 10 housing finance companies, four non-bank lenders and a small finance bank comprising a total book size of around Rs. 85,000 crore, reflecting less than half of the non-bank lending of Rs. 2 lakh crore.