Icra Sees 27% Jump In Affordable Housing Securitisation In FY2025

The rating agency Icra expects the securitisation volumes originated by affordable housing finance companies (AHFCs) to reach Rs 8,800 crore in FY2025. This entails a sharp YoY expansion of 27 per cent, as the AHFCs continue to scale up further, given the under-penetration of the mortgage loan market, improving the affordability of home buyers and low delinquency levels in the securitised pools, which provide confidence to investors.

“Securitisation as a fund-raising tool has grown in prominence in the financial sector, post the pandemic. The AHFCs have also seen similar momentum in the securitisation volumes driven by healthy asset quality and strong growth in disbursement levels. Direct assignments have been the preferred route for the AHFCs, which form 70 to 80 per cent of the total AHFC securitisation volume as it allows the entities to sell down a share of loan against property (LAP) and thus maintain the minimum requirement of housing loans on their books," said Abhishek Dafria, Senior Vice President and Group Head, Structured Finance Ratings, Icra.

The direct assignment also allows for upfront excess interest income booking, supporting profitability indicators. Nonetheless, we have witnessed increased appetite of new originators and investors towards pass-through certificate (PTC) issuances to diversify the borrowing mix, Dafria added.

Notably, Icra estimates that the securitisation volumes originated by the AHFCs had improved to Rs 6,900 crore in FY2024 from Rs 5,300 crore in FY2023, in line with the growth in their portfolio size. These volumes have consistently remained at about 13 to 14 per cent of the annual disbursements for the past few years.

The securitisation market has been widening as 15 originators participated in the market in FY2024 against 13 in FY2023. As the credit demand in this sector is likely to remain high, Icra expects new financiers to also explore this market to meet growing funding requirements. The AHFC space is dominated by the AA-category-rated entities with their average share at 80 per cent in total sell-down volumes over the last four years. The performance of the pools has also been strong. The average collection efficiency for ICRA-rated pools has been at about 99 to 100 per cent for the past three years with 90+dpd, well below 1 per cent.