PremiumMumbai: As mortgage rates remain at historic lows, India’s housing finance companies are expected to see strong growth in the coming quarters.
Analysts believe that housing finance companies (HFCs) are strongly positioned for profitable growth as they have now fortified their balance sheets with significant capital and provisioning and are focussed on diversified sources and reduced reliance on commercial papers.
“Further, strong players like HDFC have gained 200 basis points (bps) of market share over the last two years despite significant competition from banks in the retail segment," JM Financial Institutional Securities Ltd said in a report on 24 May.
With retail home loan pricing offered by major HFCs at similar level to banks now, they are well placed to accelerate their growth, it said.
Asset quality trends for mortgage lenders, it said, remain healthy given, comfortable loan to value ratio of 50-65%; instalment to income ratio (IIR) of 40% and adequate provisioning.
In terms of mortgages penetration -- mortgage loans as percentage of gross domestic product (GDP) -- India has the lowest level globally, the report said.
“Long term growth drivers that put housing finance on a strong footing going forward include, increasing urbanization, favourable demographics, rising disposable income, and tax incentives," it said.
Moreover, affordability has improved over the years, given annual income has been on an upward trajectory while property cost has been fairly stable since 2015, it added. That apart, another reason for being bullish on the segment is the fact that despite fierce competition from banks, HFCs have been able to broadly maintain their market share in residential housing segment given their deep pan-India presence, faster turnaround time and competitive rates.
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