HFCs BULLISH ON FUTURE
After clocking 24% growth last year and cornering 43% of home loan market, HFCs are bracing for accelerated growth this year
Housing finance companies (HFCs) have been on the investors radar ever since the Narendra Modi government took office in 2014. The government’s massive housing construction plan under the Housing for All scheme was seen as a major positive for the sector. This, along with a host of enabling legislations and policies, has helped many housing finance stocks to move up significantly.
HOUSING finance companies (HFCs) have been on the investors radar ever since the Narendra Modi government took office in 2014. The government’s massive housing construction plan under the Housing for All scheme was seen as a major positive for the sector. This, along with a host of enabling legislations and policies like RERA and liberal interest subsidy in a falling interest rate regime has helped many housing finance stocks to move up significantly.
However, the stocks returns on HFCs has not been uniform, with some giving negative returns in the last one year, though the segment has done well in the last financial year. The one-year return given by HFCs run by public sector banks has been negative, possibly because of the massive problems faced by their parents and their desire to monetise these arms. The one-year return on PNB Housing Finance is a negative 32.31 per cent while that of Can Fin Homes is a negative 41.20 per cent. LIC Housing Finance too has given a negative return of 36.07 per cent. In contrast, private players Gruh Finance and Dewan Housing Finance have given positive returns of 50.28 per cent and 40.17 per cent, respectively.
Ratings agency Crisil says the assets under management (AUM) of HFCs grew at 24 per cent in FY18. Also, the faster growth, together with difficulties faced by commercial banks, enabled HFCs to increase their share in the overall home loan market by one percentage point to 43 per cent.
"There are two reasons for the fast growth first is the ability of HFCs to tap the massive opportunity in affordable housing, and second is the slower credit growth at banks providing HFCs the room to ramp up faster and gain market share," Crisil senior director Krishnan Sitaraman said.
Crisil said the housing shortage in the affordable segment, regulatory facilitation, entry of a large number of HFCs with sharp focus on the affordable segment will ensure that the AUM continues growing at 18-20 per cent per annum.
Another rating agency, Icra said government incentives to boost the residential real estate sector, especially budget housing, may push housing credit growth to 17-19 per cent in the current fiscal year.
"Growing affordability for the first-time home buyers, supported by government incentives like the PM's Awas Yojana are expected to result in a rise in primary home purchases, which will help segmental loan growth to 17-19 per cent," Icra said.
It said housing credit grew 16 per cent in FY18, taking the mortgage penetration (as a percentage of GDP) to 10 per cent for the first time in FY18, up from 9.5 per cent in FY17. "We expect mortgage penetration level to go up by 300 -500 bps over the next five years," Icra said.
Going by interactions at a recent JM Financial conference, HFCs are bullish about the years ahead and are making substantive efforts to tap the emerging opportunities. Here are key takeaways from the JM Financial Conference:
Gruh Finance and DHFL have given one-year returns of 50.28 per cent and 40.17 per cent