Mumbai, March 5 : The individual housing finance market in India which is currently valued at Rs 33 lakh crore is expected to grow at a Compound Annual Growth Rate (CAGR) of 15-16 per cent between FY25-30 to Rs 77-81 lakh crore, according to a report by CareEdge Ratings released on Wednesday.
CareEdge Ratings believes that this growth will be driven by robust structural elements and favourable government incentives, making housing finance an attractive asset class for lenders.
It says that the residential properties market remains buoyant, a key driver of the housing finance industry, witnessing absolute growth of 74 per cent since 2019 to 4.6 lakh units in 2024. While sales performance in 2024 normalised, it still reflected sustained buyer confidence.
Over FY21-24, banks have grown at a CAGR of 17 per cent in the housing loan space while Housing Finance Companies (HFCs) have grown by 12 per cent.
Though, banks continued to dominate the housing loan market (market share of 74.5 per cent as on March 31, 2024) facilitated by cost of funds advantage, reach, portfolio buyouts and co-lending arrangements, CareEdge Ratings believes that both banks and HFCs have ample space to grow, given the growth potential of the housing finance market.
The market share of HFCs was stable at around 19 per cent as on March 31, 2024, and this trend is expected to continue.
In FY24, the loan portfolio of HFCs grew by 13.2 per cent to Rs.9.6 lakh crore, aligning with CareEdge Ratings’ growth estimate of 12-14 per cent.
For FY25 and FY26, CareEdge Ratings anticipates a Year-on-Year (YoY) growth of 12.7 per cent and 13.5 per cent, respectively, driven by robust equity inflows and capital reserves.
The retail segment remains the primary growth driver for HFCs, with cautious growth observed in the wholesale segment.
Geeta Chainani, Associate Director, CareEdge Ratings said, “HFCs primarily operate in ticket sizes of less than Rs.30 lakh, which accounted for 53 per cent of total AUM as of March 2024. However, there is a gradual rise from 23 per cent to 27 per cent in the proportion of AUM with ticket sizes ranging between Rs.30-Rs.50 lakh and a decline in proportion of AUM less than Rs.30 lakh between March 31 and September 30, 2024.”
In line with growth trends, asset quality of HFCs has seen a sharp improvement with Gross Non-Performing Assets (GNPA) of 2.2 per cent as on March 31, 2024, against the peak of 4.3 per cent as on March 31, 2022. The improved asset quality trend is largely due to improved wholesale GNPA and stable retail GNPA.
Two-year lagged GNPA, and stage 2 gross assets are also not reflecting any significant stress, making CareEdge Ratings believe that asset quality of HFCs remains comfortable.
Despite a healthy AUM growth for HFCs, the gearing level of the sector was largely range bound as of March 31, 2024, at 6.0 times and declined to 5.5 times as of September 30, 2024.
Like NBFCs, HFCs have also experienced deleveraging following the liquidity crisis and the shock of the pandemic. Post pandemic, the sector has attracted healthy equity pools due to the secured nature of lending and low credit costs, the report added. (IANS)