Housing finance companies (HFCs) are expected to post 10-12% growth in their assets under management (AUM) on the back of affordable housing loans in the current financial year, stated a report by rating agency Crisil.
Though growth in loans to real estate developers and loans against property (LAP) will continue to be muted, affordable housing financiers are likely to grow relatively faster at 18-20% as these companies face lower competition from banks, the report said.
Last financial year, the HFC sector saw an annualised growth of merely 2% in the first half owing to the second wave of the pandemic, followed by 14% growth in the second half after recovering from the pandemic. Despite the growth, HFCs are expected to continue losing home-loan market share to banks owing to the former’s higher borrowing costs compared to banks.
HFCs have already ceded 400 basis points market share to banks over the past four fiscal years. The banks’ share have risen to around 62% as of March.
The trend is unlikely to reverse in the near term. Banks are expected to gain market share further with HDFC Ltd, the largest HFC, set to merge with HDFC Bank in the next financial year, the report said.
“Structural factors driving end-user housing demand remain intact this fiscal despite the impact of rising real estate prices and interest rates. This should drive 13-15% growth in the home loan segment,” Krishnan Sitaraman, senior director and deputy chief ratings officer, said.