ICRA Projects Securitisation Volumes by affordable housing finance companies to Reach Rs 8,800 Crore in FY2025
ICRA anticipates that securitization volumes originated by affordable housing finance companies (AHFCs) will surge to Rs 8,800 crore in FY2025, marking a significant year-on-year growth of 27%. This increase is driven by the continued expansion of AHFCs, supported by the under-penetration of the mortgage loan market, improved affordability for home buyers, and low delinquency rates in securitized pools, which boost investor confidence.
Abhishek Dafria, Senior Vice President and Group Head, Structured Finance Ratings at ICRA, remarked, “Securitization has gained prominence as a fundraising tool in the financial sector, especially post-pandemic. AHFCs have experienced similar momentum, with rising securitization volumes fueled by healthy asset quality and strong disbursement growth. Direct assignments, which account for approximately 70-80% of total AHFC securitization volumes, are preferred by AHFCs as they allow for the sale of loan against property (LAP) while maintaining the minimum required housing loans on their books. Direct assignments also facilitate upfront excess interest income booking, which supports profitability indicators. However, we have observed a growing interest among new originators and investors in pass-through certificate (PTC) issuances, which helps diversify the borrowing mix.”
ICRA estimates that securitization volumes originated by AHFCs increased to Rs 6,900 crore in FY2024 from Rs 5,300 crore in FY2023, aligning with portfolio growth. These volumes have consistently represented about 13-14% of annual disbursements over recent years.
The securitization market has broadened, with 15 originators participating in FY2024, up from 13 in FY2023. As credit demand in this sector remains high, ICRA expects new financiers to explore this market to meet growing funding needs. The AHFC sector is dominated by AA-category rated entities, which have maintained an average share of around 80% in total sell-down volumes over the last four years. Pool performance has also been strong, with ICRA-rated pools achieving average collection efficiency of 99-100% over the past three years, and 90+ days past due (dpd) remaining well below 1%.
“The establishment of RMBS Development Company Limited in March 2024 is a positive development in deepening the mortgage-backed securitization market,” Dafria added. “The new entity aims to scale up the industry and create a liquid secondary market, given the expected strong growth in the mortgage business in the near to medium term. However, it is crucial for this entity to develop the right tools and environment to enhance securitization knowledge and attract new investor categories, such as insurance companies and pension funds, to invest in long-tenure assets. Additionally, the budgetary support for PMAY (U) 2.0 will further boost the affordable housing finance market, ensuring a steady supply of assets for securitization.”
Exhibit 1. Disbursements and securitisation trends for AHFCs*
Exhibit 1. Monthly collection efficiency in ICRA-rated AHFC pools (PTCs)
Exhibit 1. 90+ delinquency in ICRA-rated AHFC pools (PTCs)
