New age and regional HFCs to grow over 25%
Even the regulator has upped the ante, with the share of NHB’s disbursements rising to 50% for HFCs in FY16 from 37% in FY13. Moreover, the banking system’s exposure to MFIs has increased 3x over FY15-FY17. Most of the large MFIs turned SFBs plan to diversify assets into individual secured loan book, mainly housing finance. Ind-Ra sees an increased share of banking assets towards housing loans of 12.5% from 9.4% over FY13-FYE17.
Ind-Ra expects new age and regional HFCs to grow over 25% backed by private equity funding, primary market offerings as well as increased enabler on the liability front by banks. The presence of large corporate houses is already being felt and those with deep pockets are likely to contribute a large share in the total infusion. The existing larger HFCs as well as SFBs are expected to increasingly focus on allocating equity for this space. Banks have also enabled HFCs through increased asset allocation with a relatively higher tenure, witnessing a 1.5x rise over FY15 to FY17. The ability of financers to gauge income and expense for customer lifecycle with a reasonable margin of safety would be of prime importance.
Ind-Ra expects mid-sized HFCs to continue to grow at least 8%-10% above the system average. The growth is likely to be driven by a fair mix of volume. Public sector banks have been slowing their pace in the affordable housing segment. HFCs registered a median CAGR of 38% over FY13-1HFY17 in the housing book, against a CAGR of 19.9% for the sector. Banks’ non-priority mortgage lending and priority sector housing loans grew at a CAGR of 21.8% and 8.0%, respectively, over FY11-FY17.