Bajaj Housing Finance (BHFL), a subsidiary of Bajaj Finance (BFL), is looking to grow its loan book to Rs 8,000 crore by the financial year 2019-20.
BHFL is the second housing finance company (HFC) after Piramal Housing Finance to announce aggressive loan growth plans. Piramal HFC, which commenced its operations last month, is targeting a rapid expansion of its loan book to over Rs 15,000 crore by the end of FY20.
BHFL’s parent company, BFL, has injected an equity of Rs 300 crore in the company so far. It will infuse regular capital into the mortgage company to support its growth plans. BFL’s outstanding housing loans will be allowed to run down with loan repayments. The new loans generated by the group from second quarter of 2017-18 are being booked by BHFL.
India Ratings has upgraded its rating for BHFL’s long-term bank loans from ‘AA+’ to ‘AAA’. BHFL’s ratings are driven by the expectation of support, if required, from its 100 percent parent, BFL, and the Bajaj group.
BHFL was carved out of BFL to carry out the group’s existing housing loan business in 2016. But it effectively operates as an integrated business division of BFL.
BHFL is regulated by the National Housing Bank. It requires lower risk weights (50 per cent-75 per cent for various ticket sizes and loan-to-value categories). It can, therefore, utilise capital more optimally for low-risk and low-yielding housing loans, India ratings said.
For loans for both salaried and self-employed clients, BHFL would target customers from BFL’s existing customer base (around 16 million), which has mainly availed of consumer durables and personal loans. BFL assets under management in the home loan category stood at Rs 3,691 crore in the salaried category and Rs 4,024 crore in the self-employed client category.
While its dependence on direct-selling agents would remain minimal, the company would continue to focus on loan balance takeovers from banks.
Rating agency Icra, in review of housing credit (by banks and HFCs), said the total housing credit outstanding in India was around Rs 14.4 trillion as on March 31, 2017, up from Rs 12.4 trillion a year ago. The housing credit growth slowed down to 16 per cent in FY17 from 19 per cent in FY16.
Despite the moderation in growth in FY17, long-term growth outlook for the sector remains positive. The higher growth expected in the affordable housing segment is supported by the government’s focus on “Housing for All by 2022”. Also, a favourable regulatory environment and an increase in supply of houses in this segment will support higher growth in housing credit, Icra said.