Housing finance companies (HFCs) and non-banking finance companies (NBFCs), which have cruised on lower borrowing costs and easy access to finance in the recent years, are set for some hiccups as the interest rate cycle reverses course.
The rates on commercial papers (CPs) and non-convertible debentures (NCDs) have already increased over 100 basis points (bps) in the past year or so, even as the one-year marginal cost of funds-based lending rate (MCLR) has risen 30 bps. And the interest rate trajectory is expected to remain elevated for a while.
Given this, CRISIL Research expects the cost of borrowing to rise over 30 bps in fiscal 2019 and by a further 40-50 bps in fiscal 2020.
Says Prasad Koparkar, Senior Director, CRISIL Research, “Large HFCs will likely maintain their net interest margin (NIM) with increase in housing interest rates, relatively higher proportion of floating rate loans, and continued strong growth in the high-margin loan against property and developer loan segments.”