Housing Finance Companies' AUM To Grow 10%-12% in FY22-23: CRISIL
IANS 14 September 2022
The assets under management (AUM) of housing finance companies (HFCs) are expected to grow 10%-12% in this financial year 2022-23, against 8% in the previous financial year, mainly due to home loans, which could grow 15% year-on-year (y-o-y), said CRISIL.
Last fiscal, HFC growth was a story of two halves: stunted to just about 2% (annualised) in the first half because of the second wave of the pandemic, and a V-shaped 14% (annualised) growth in the second half.
"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. And despite the recent hikes, interest rates remain below previous cycles and haven't impacted customer interest materially," said Krishnan Sitaraman, senior director and deputy chief ratings officer, CRISIL Ratings.
Despite the growth, HFCs are expected to continue losing home-loan market share to banks amid stiff competition.
While access to funding is not a big challenge for most housing financiers, competitive borrowing cost is crucial versus banks, which benefit from low-cost deposit funding.
HFCs have already conceded 400bps (basis points) market-share to banks over the past four fiscals resulting in banks' share rising to 62% as of March 2022.
This 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 next fiscal.
The ability of HFCs to compete with banks in the traditional salaried-home-loan segment remains a challenge given their relatively higher funding costs.
HFCs are expected to increasingly partner with banks and leverage each other's strengths to grow their books. Some HFCs are already moving in this direction. Therefore, asset/on-book growth is likely to be lower compared with AUM growth.
Meanwhile, one segment where HFCs have been growing relatively faster is affordable housing loans, where competition from banks is limited.
Affordable housing financiers (AHFCs), therefore, have seen relatively better growth of 12%-15% in the recent past despite moderation from earlier levels. Given their relatively smaller footprint and large underlying demand, AHFCs are expected to keep growing faster than traditional HFCs.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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