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The National Housing Bank is all set to introduce provisioning requirement for standard asset individual home loans. The move comes in as NHB feels that going forward there could be defaults in the housing loans space, largely because of the rising interest rate scenario, reports CNBC-TV18’s Gopika Gopakumar.
In other words, this norm means that companies will have to set aside 0.4% of the total provision against these loans. Currently, only corporate non-individual loans attract 0.4% of provisioning.
NHB believes this will be a prudent measure to introduce higher provisioning on standard individual home loans. As a whole, most housing finance companies like HDFC and LIC Housing Finance Company have been making higher or extra provisioning on their home loans. For instance, HDFC has made a total provision of Rs 1,124 crore last year. This is an additional provisioning which they have made.
Following the news, the housing stocks took a hit.
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Analysts believe that this may not have an immediate impact on housing loan companies because they have been prudently making higher provisioning or extra provisioning on their entire loan book.
NHB is yet to come out with the circular, so none of the companies have received any kind of information from the housing finance regulator. The big housing finance companies have all made extra provision, therefore it maybe the smaller ones who could probably see a hit. Some assumptions by analysts indicate that this could have a hit on the profitability for HDFC say around 7%. For LIC Housing Finance it could be around 17% of their last year’s profitability. However, NHB will come out with specific guidelines which will direct the impact on the housing finance companies profitability.
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