The housing finance
market in India is fragmented, with 80-plus players. However, two large companies, HDFC and LIC, each has assets over Rs 1 lakh crore, cornering 57 per cent, according to rating agency Icra. The next batch, of three HFCs — DHFL, Indiabulls and PNB HFL — with a book size of Rs 15,000-50,000 crore each — have a combined market share of 21 per cent.
Sector executives said though these five have a dominant share, the thrust on affordable housing finance
will gradually change the scenario. A little more than 25 HFCs have been set up since 2015.
The growth also comes with some risk, such as more laxity in underwriting standards in the midst of effort to expand books. The seasoning of affordable loans will throw up the challenge of slippages. Also, credit to developers (also known as developer loans) could be in default on account of consolidation and churn in real estate, due to regulatory reforms, they said.
Further down the ladder, eight players with an asset base of Rs 5,000-15,000 crore have a combined 12 per cent share in the market. The prominent ones here include Gruh, HDFC’s subsidiary, Tata Capital Housing, Canfin Homes, India Infoline and ICICI Home. Rating agency data show those having a loan book below Rs 5,000 crore hold a small share of 10 per cent in all. The reported capital adequacy of HFCs remains comfortable, given the relatively lower risk weight for home loans.
By Icra’s estimate, HFCs will require Rs 9,000-16,000 crore of external capital (11-19 per cent of existing net worth) to grow at a compounded annual rate of 20-22 per cent for the next three years. The internal capital generation level (after dividend) would be 15-16 per cent and the gearing level is eight to nine times. Most of this incremental capital requirement would be for the small HFCs, including those operating in affordable housing. HFCs compete with commercial banks in home loans and their market share has grown gradually. With the spawning of new companies, especially for affordable housing, their share in an expanding pie is expected to grow at a faster pace. HFCs' share in total housing loans was 33 per cent in March 2012 and 37 per cent in March 2017. Commercial banks’ share went from 67 per cent to 63 per cent.