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5 housing finance companies dominate mkt, lend 78% of home loans: Icra

HDFC, LIC own assets worth over Rs 1 lakh cr, cornering around 57%

Abhijit Lele  |  Mumbai 

market share
Representative image.

The market in India is fragmented, with 80-plus players. However, two large companies, and LIC, each has assets over Rs 1 lakh crore, cornering 57 per cent, according to rating agency The next batch, of three — DHFL, and — with a book size of Rs 15,000-50,000 crore each — have a combined of 21 per cent.

Sector executives said though these five have a dominant share, the thrust on will gradually change the scenario. A little more than 25 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 remains comfortable, given the relatively lower risk weight for home loans.

By Icra’s estimate, 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 compete with commercial banks in home loans and their 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 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.

First Published: Fri, September 29 2017. 00:30 IST