Post Budget Analysis | Housing Finance Companies

<span style="font-weight: bold;">Proposals</span><br />
<br />
<ul>
<li>Allocation for the Pradhan Mantri Awas Yojna (PMAY) at Rs 27,414 crore for FY2019 against Rs 28,951 crore last year.</li>
<li>Under PMAY (Gramin), 51 lakh houses to be constructed in FY2019; assistance for constructing 37 lakh houses in urban areas has been sanctioned.</li>
<li>The Affordable Housing Fund (AHF) set up under the NHB to be funded by priority sector lending shortfall and fully-serviced bonds authorised by the government of India.&nbsp; </li>
<li>Reducing regulatory threshold of credit rating from AA to A for investments in corporate bonds.</li></ul><br />
<span style="font-weight: bold;">Impact: Positive</span><br />
The Union Budget for FY2018 has maintained focus on meeting the Housing for All agenda by 2022. The allocation is marginally lower than the last fiscal. Nevertheless, it remains sizeable, which is likely to support the growth momentum in the affordable housing sector. Thrust on increasing rural income is also likely to boost the demand for housing and is likely to be optimistic for the housing finance companies from the growth perspective, especially for players with good presence in rural/semi-urban areas. In addition to the credit-linked subsidy scheme (CLSS), AHF is likely to increase the funding options for housing finance companies (HFCs) operating in affordable housing space. HFCs operating in the affordable housing space (total portfolio of Rs 926 billion as on September 30, 2017, which was 10 per cent of HFC credit) can benefit from lower funding costs, which is likely to improve affordability of end borrowers. Reduced rating threshold will help in broadening the investor base and is likely to increase avenues for HFCs rated in A category to raise funds for longer tenure and hence manage liquidity profile better. <br />