Owing to the second wave of the COVID pandemic, the Indian economy is likely to mirror a similar trend seen in FY20-21, when the first half of the financial year is weaker and the second half is significantly stronger, says Deepak Parekh, chairman of Housing Development Finance Corp Ltd (HDFC). "I remain confident that India's macro-economic fundamentals are strong. Recovery is underway," he added.
Speaking at HDFC's 44th annual general meeting (AGM), Mr Parekh says, "In terms of the overall macro-economic environment, the key challenge remains the unpredictability of coronavirus. The world is still susceptible to recurring waves of infections. Thus, economic recovery will remain uneven and patchy."
The government has undertaken several reforms and measures to alleviate COVID-19-related stress. The government has widened the scope of the emergency credit line guarantee scheme to support individuals and businesses impacted by COVID-19. The scheme helps to channel credit to where it is needed the most.
"The key laggard remains overall credit growth which continues to remain tepid," Mr Parekh says.
According to the HDFC chief, the pandemic has reaffirmed that there can be no greater security in life than a home. "The inherent demand for home loans continues to remain strong," he says, adding, "Even in terms of commercial real estate, most companies have not given up their office premises."
"With the e-commerce boom, demand for real estate is coming from warehousing and fulfilment centres. Similarly, with the build-up of digital infrastructure, demand for data centres have increased. These are segments of the real estate sector that have potential to grow immensely," the HDFC chief added.
Talking about HDFC's performance during FY20-21, Mr Parekh says, the company's asset quality has been challenging for non-individual loans at a systemic level, however "the corporation has always been prudent in identifying loans where there could be stress and has adequately provided for such loans."
Against the backdrop of the pandemic, HDFC had articulated that there are three key monitorables - liquidity, growth, and asset quality. "The corporation has been maintaining higher levels of liquidity as a prudent measure. In terms of growth, the national lockdown impacted individual loans, but once restrictions were eased, the demand surpassed all expectations. We are confident that demand for housing will continue to be strong."
As on 31 March 2021, HDFC has assets under management (AUM) worth Rs5.70 lakh crore, recording a growth of 10%. In accordance with regulatory norms, its gross non-performing loans (GNPL), stood at Rs9,759 crore, constituting 1.98% of its total loan portfolio.
As per regulatory norms, HDFC is required to carry total provisions of Rs5,491 crore, Mr Parekh says adding "The actual provisions carried as at 31 March 2021 stood at Rs13,025 crore. The provisions carried as a percentage of the exposure at default is equivalent to 2.62%."
For FY20-21, HDFC recorded a stand-alone net profit of Rs12,027 crore. "Based on the performance of the company, the board of directors recommended a dividend of Rs23 per equity share of face value of Rs2 each for the financial year 2020-21," the HDFC chairman says.
During FY20-21, according to Mr Parekh, demand for housing was for both, affordable housing and high-end properties. He says, "The average size of individual loans stood at Rs29.5 lakh compared with Rs27 lakh in the previous year."