Housing finance companies shares hit new high in weak market

Shares of housing finance companies (HFCs) were trading higher by up to 4%, extending its past week rally, after the Reserve Bank of India (RBI) lowered risk-weights assigned to home loans lent on or after June 7.

LIC Housing Finance, PNB Housing Finance, Gruh Finance, GIC Housing Finance and Can Fin Homes hit their respective record highs on BSE in intra-day trade on Monday. At 12:34 pm as compared to S&P BSE Sensex, which was down 0.46% or 143 points at 31,119.

Since June 7 RBI policy, HFCs has outperformed the market by gaining up to 18% against 0.5% decline in the benchmark index.

The RBI has reduced the risk weightage on home loans above Rs 75 lakhs to 50% from earlier 75% and in addition to this, the standard asset provisioning on home loans has been reduced to 25 bps from 40 bps.

“We had been positive on the housing finance space in India and the current measure of lower risk weightage and lower provisioning requirement should bring in higher growth for the sector in the quarters to come,” Angel Broking said in a client note.

Meanwhile, thus far in the calendar year 2017, the market value of GIC Housing Finance has been more than doubled. PNB Housing Finance and Can Fin Homes, Indiabulls Housing and Dewan Housing Finance in the range of 75% to 96%.

The Union Budget for 2017-18 sharpened its focus on expansion of the affordable housing sector to address the supply side and affordability related issues. According to ICRA, the allocation under the Pradhan Mantri Awas Yojana (PMAY) for 2017-18 was increased by 39% to Rs 29,000 crore.

Also, affordable housing has been accorded the infrastructure status, which is likely to help in participation to help in participation of wider investor community henceforth, and will improve the access to funding avenues like insurance funds, Employee Provident Fund Organization (EPFO) among others.

This is likely to increase access to long-term funds and lower cost of funding for the sector. These proposals along with Real Estate Regulations and Development Act, 2016 (RERA) are also likely to further boost the supply of affordable houses and help the Government in achieving its ‘Housing for All’ objective over the medium to long term.

        % Change
Company 30/12/2016 06/06/2017 LTP YTD PRB
GIC Housing Fin 269.10 545.50 593.00 120.4 8.7
PNB Housing 839.75 1396.55 1645.00 95.9 17.8
Can Fin Homes 1581.40 2766.30 3046.65 92.7 10.1
Indiabulls Hous. 650.45 1138.95 1154.70 77.5 1.4
DHFL 243.70 424.80 432.55 77.5 1.8
Repco Home Fin 557.30 780.10 835.05 49.8 7.0
GRUH Finance 322.25 399.90 441.05 36.9 10.3
LIC Housing Fin. 559.45 736.60 759.50 35.8 3.1
HDFC 1262.45 1606.10 1643.75 30.2 2.3
Sensex 26626.46 31262.06 31115.00 16.9 -0.5
LTP : Last traded price on BSE in Rs at 12:34 pm
PRB : Post RBI policy


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