New age and re­gional HFCs to grow over 25%

Banking Frontiers - - Research Notes -

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.

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