MUMBAI: Housing finance companies (HFCs) are expected to continue losing home-loan market share to banks amid stiff competition. According to a Crisil report released on Wednesday, HFCs have already conceded 400 basis points market share to banks over the past four fiscals, resulting in banks’ share rising to 62% as of March 2022.
This despite the fact that assets under management (AUM) of housing finance companies is expected to increase 10-12% this fiscal, versus an 8% growth last financial year, driven by home loans, which could grow 15% year on-year.
“The ability of HFCs to compete with banks in the traditional salaried-home-loan segment remains a challenge given their relatively higher funding costs. And in the non-home loan segments (developer financing and LAP), which have been yield kickers, HFCs’ exposure has reduced in the past few years, which has put pressure on overall spreads,” said the rating agency in its report
Growth in developer financing and loans against property (LAP) will continue to be muted. However, affordable housing financiers are likely to grow relatively faster at 18-20%.
The home loan segment (72% of AUM) grew 11% last fiscal due to better affordability, improved income visibility after resumption of economic activity, higher demand in urban areas and increased preference for home ownership. In other segments, growth was flat with only large and well-capitalised HFCs active in wholesale financing, said the report.
“Structural factors driving end-user housing demand remain intact this fiscal despite the impact of rising real estate prices and interest rates. This should drive 13-15% growth in the home loan segment. And despite the recent hikes, interest rates remain below previous cycles and haven’t impacted customer interest materially,” said Krishnan Sitaraman, senior director and deputy chief ratings officer, CRISIL Ratings.
According to the rating agency, HFCs are expected to increasingly partner with banks and leverage each other’s strengths to grow their books. Some HFCs are already moving in this direction. Therefore, asset/on-book growth is likely to be lower compared with AUM growth.
One segment where HFCs have been growing relatively faster is affordable housing loans, where competition from banks is limited. Affordable housing financiers (AHFCs), therefore, have seen relatively better growth of 12-15% in the recent past despite moderation from earlier levels. Given their relatively smaller footprint and large underlying demand, AHFCs are expected to keep growing faster than traditional HFCs, the report added.
Download The Mint News App to get Daily Market Updates.
More
Less
Post your comment
