an increasingly aggressive home loan The play will help banks gain market share at the expense of HFCs.
Data shows banks are constantly eating HFCMarket share in the last four financial years. As of March 2022, banks held 62% of the market.
According to Crisil, this trend of market share is unlikely to change in the near future. Recent mergers between pure-play home financiers HDFC with HDFC bank will only fuel the trend, the agency noted.
Affordable housing is the only sector where housing finance companies have grown relatively rapidly. This is because competition from banks in that segment is relatively low, the report said.
Crisil said HFCs are having a tough time trying to increase their market share as compared to banks, because of their high financing costs.
It may be noted here that most HFCs have easy access to financing, but they are not at the same level as banks which have a large (low-cost) deposit base.
According to Crisil, “Given the challenges such as thin spreads, strict regulatory stipulations and lack of depth in the corporate bond market, HFCs will need to revamp their business model.”
The agency said it expects more HFCs to partner with banks; In this way, both partners are able to take advantage of each other’s strengths. Many such alliances have already taken place.
The agency said the core home loan segment for HFCs will grow at 15 per cent in FY13, while growth in developer financing and loans against property will remain muted.
In the last financial year, the HFC growth story was in two distinct halves. In the first half, there was a year-on-year growth of just 2 per cent due to the second Covid wave. But the second half saw an increase of 14 per cent in annual growth.