The housing finance market in India is fragmented, with over 80 players. However, two big companies, HDFC and LIC, each have assets of more than Rs 1 lakh crore, grabbing 57%, according to ratings agency Icra. The next batch, consisting of three HFCs – DHFL, Indiabulls and PNB HFL – with a book size of Rs 15,000 to 50,000 crore each – has a combined market share of 21%.
Industry executives said that although these five have a dominant share, the push on affordable housing finance will gradually change the scenario. Just over 25 HFCs have been introduced since 2015.
The growth also comes with some risks, such as greater laxity in underwriting standards amid efforts to expand the books. The seasoning of affordable loans will launch the challenge of slippages. In addition, developer credit (also known as developer loans) could default due to real estate consolidation and turnover, due to regulatory reforms, they said.
Further down the ladder, eight players with an asset base of Rs 5,000 to 15,000 crores hold a combined market share of 12%. The main ones here include HDFC subsidiary Gruh, Tata Capital Housing, Canfin Homes, India Infoline and ICICI Home. Rating agency data shows that those with a loan portfolio of less than Rs 5,000 crore hold a small share of 10% in total. The reported capital adequacy of HFCs remains comfortable, given the relatively lower risk weight for mortgages.
According to Icra’s estimate, HFCs will need Rs 9,000-16,000 crore of external capital (11-19% of existing net worth) to grow at a compound annual rate of 20-22% over the next few years. next three years. The level of internal capital generation (after dividend) would be 15 to 16% and the level of debt would be eight to nine times. The bulk of these additional capital requirements would be for smaller HFCs, including those operating in affordable housing. HFCs compete with commercial banks for home loans and their market share has gradually increased. With the emergence of new businesses, especially for affordable housing, their share in an expanding pie is expected to grow at a faster rate. The share of HFCs in total housing loans was 33% in March 2012 and 37% in March 2017. The share of commercial banks increased from 67% to 63%.