The country’s largest lender, State Bank India (SBI), has captured 17% of the domestic housing finance market share, same as HDFC’s share as on March 2010.

According to Icra report on ?Performance review of housing finance companies and Indian mortgage finance market for 2009-10?, both SBI and HDFC have 17% market share each while the ICICI Bank which has slowed down its housing finance exposure has 13% share. LIC housing finance and IDBI Group have 8% and 4%, respectively.

As of March 31, 2010, HDFC (along with HDFC Bank), State Bank of India, ICICI Bank (along with ICICI Home Finance,) and LIC Housing Finance (LIC HFL) clearly dominate the domestic mortgage market, together accounting for 55% of the total housing credit in India, said the report.

Apart from these big players, there are some housing finance companies (HFCs) with relatively smaller credit portfolios operating in their respective geographies or serving niche customers.

While small HFCs, over the past few years, have been growing their portfolio rapidly, the rating agency expects the currently dominant players to continue maintain their market share, henceforth.

Meanwhile, banks which together hold around 70% of the total individual home loan market, are expected to maintain a sizable market share, even as HFCs are likely to grow by offering superior service levels and by tapping underdeveloped segments. Further, significant growth plans of some of the new HFCs could also increase the overall market share of HFCs, said the report. Although housing loans remain the main source of revenues for small HFCs, the proportion of other loans in their loan book increased to 8% as on 31 March, 2010 from 7% the previous fiscal.

Other loans consist mostly of loans against property, lease rental discounting, and builder loans. One of the primary reasons for the shift in the portfolio mix of HFCs is the intense competition from banks, which has pulled down incremental yields on housing loans. Non-housing loans, on the other hand, offer relatively higher yields although the risks inherent in these segments are higher than those in housing loans, ICRA said.

Talking about the asset quality, Vibha Batra, senior VP, co-head, financial sector ratings, ICRA says that HFCs continue to maintain superior asset quality as against public sector banks.

?The top five PSBs had a gross non-performing (NPA) percentage of 2.6% in their housing finance book as on 31 March, 2010, against which HFCs had a 0.9%,? she adds.

Credit provisions were low for HFCs at 0.07% in relation to average advances, in 2009-10 with the asset quality profile remaining comfortable. The increased coverage of borrowers under the database of the credit information bureau and its extensive use by lenders, including HFCs, has helped them reject applicants with poor credit quality, Batra pointed out.

However, Batra cautions that a shift in the credit mix of some HFCs towards riskier segments could lead to an increase in fresh slippages and therefore credit costs from the currently low levels.