Indian Housing Finance - Sector Update - ICICI Securities

The Indian housing finance industry (ex-developer) is worth Rs. 20.7 lakh crore with banks forming a larger proportion of it at Rs. 13.6 lakh crore and HFC/NBFC at Rs. 7.1 lakh crore as on December 2019. Continued funding constraints, lower disbursement have impacted business traction of HFCs significantly to 6% in December 2019. Banks continued to grow at a higher pace vs. HFCs, partly supported by healthy liability franchise, portfolio buyouts that led overall market to grow 13%. Hence, there was a shift in market share among key segmental players with share of banks increasing to ~66% in December 2019 vs. 62% in June 2018. Going ahead, overall core housing credit growth is expected to remain moderate in single digits in FY21E, lower than three-year CAGR of 16%, led by Covid-19 induced crisis.

Majority of listed HFCs have more than 50% of funding to home loans, thereby adhering to the proposed regulation. Therefore, no material impact is seen on listed HFCs. Currently, HFCs providing finance to developers do engage in direct tie-up to provide home loans to individual home buyers. Prohibition of such mechanism is seen impacting business growth ahead. Given competitive intensity in the home finance market, large HFCs may see an impact as banks can continue in the current format. We expect real estate sector pain to get elongated with high ticket and discretionary housing demand getting impacted while affordable housing is expected to continue growing with a small blip. With regulations getting tighter, premium valuation of HFCs are expected to decline ahead. Therefore, we believe leaders like HDFC Ltd would gain market share due to its ability to raise capital and benefit on cost of funds. Smaller HFCs with higher LAP and commercial portfolio can be avoided in the near term.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_HFC_SectorUpdate_Jun20.pdf

Shares of HOUSING DEVELOPMENT FINANCE CORP.LTD. was last trading in BSE at Rs.1839.1 as compared to the previous close of Rs. 1855.15. The total number of shares traded during the day was 292403 in over 12155 trades.

The stock hit an intraday high of Rs. 1866.85 and intraday low of 1815. The net turnover during the day was Rs. 537040529.

Source : Equity Bulls

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