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Domestic rating agency ICRA in its latest report has said that the real estate asset under management (AUM) of non-banks (non-banking financial companies and housing finance companies), which registered a de-growth of 10 percent in 2021, is likely to contract further by 5-10 percent in 2022 and stabilize in the next year. It noted that the real estate AUM of non-banks contracted by 17.64 percent to Rs 2.8 lakh crore as of March 2021 from Rs 3.4 lakh crore as of March 2019.

According to the report, the outlook for real estate-oriented non-banks remains negative due to the asset quality pressures over the near to medium term and the muted growth expectation. It noted that non-banks witnessed a significant slowdown in growth since H2 FY2019, following the liquidity crisis, and consequently moderated their disbursements. It said the performance of non-banks in recent years has been marred by several challenges as entities have grappled with fund-raising challenges and asset quality issues. The impact was more pronounced on wholesale financiers with sizeable real estate exposures compared to their retail counterparts owing to a prolonged period of risk aversion by investors and other stakeholders.

The agency said the real estate-oriented non-banks have witnessed an improvement in their capitalization profiles since March 2018 driven by the moderation in the AUM growth coupled with sizable capital raise in a bid to strengthen their balance sheets. It said the capital cushion for real estate-oriented non-banks is estimated to have increased by 4 percent from March 2019 to March 2021. It added that the current capitalization level also provides the ability to absorb losses.