The ICRA report stated that growing affordability and government initiatives like PM's Awas Yojana are expected to result in a rise in primary home purchases.
Government incentives to boost the residential real estate sector, especially budget housing, may push housing credit growth to 17-19 percent in the current fiscal year, according to a report.
"Growing affordability for the first-time home buyers, supported by government incentives like the PM's Awas Yojana are expected to result in a rise in primary home purchases, especially in the affordable housing segment, which will help segmental loan growth to 17-19 percent,"the ICRA report said.
Housing credit grew 16 percent in FY18, taking the mortgage penetration (housing credit as a percentage of GDP) to double-digit mark of 10 percent for the first time in FY18, up from 9.5 percent in FY17.
Overall housing credit grew 39 percent in the year to March 2018, which was pushed by new mortgage players in the affordable housing segment.
"We expect mortgage penetration level to go up by 300 -500 bps over the next five years," the report said.
Overall asset quality indicators for all housing finance firms remained stable with gross NPAs of 1.1 percent for FY18, better than the 1.2 percent in December 2017 but worse than the 0.8 percent NPAs in FY17.
ICRA expects overall gross NPAs for housing finance companies (HFCs) to remain range-bound between 1.2 and 1.5 percent this year.
"The retail home loan asset quality of HFCs is likely to be benefited by the recent Cabinet decision to treat home buyers as financial creditors," it said.
However, gross NPAs in the sub-segment deteriorated from 3.3 percent in FY17 to 4.1 percent in FY18, driven by greater portfolio seasoning, entity-specific factors in some cases and external events such as note-ban and GST rollout, which have impacted cash flows of borrowers.On the funding side, the report said HFCs would need to tie-up for Rs 4 trillion of incremental funds to meet the growth plans as well as replacing the maturing liabilities in FY19.