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

Financial Chronicle - - FRONT PAGE - FC BUREAU New Delhi

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

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