HFCs in India anticipate 12% to 14% growth amidst housing loan momentum

It is mainly fueled by continued momentum in housing loans and an expected revival in developer loans.

Housing finance companies (HFCs) in India are expected to witness a 12% to 14% increase in assets under management (AUM), CareEdge ratings reported.

According to Gaurav Dixit, director of BFSI Rating at CareEdge Ratings, the growth is mainly fueled by continued momentum in housing loans and an expected revival in developer loans.

Whilst wholesale financing is expected to rise by 10% to 12% in the medium term, caution is advised amongst financiers. 

“Driven by an up-cycle in residential real estate market and waning wholesale credit stress, pool of stressed wholesale assets as a proportion to HFCs net-worth is expected to improve to roughly 10% by March 2024,” Dixit said.

Despite potential marginal impacts on profitability due to net interest margins, FY24 is anticipated to see robust profitability, supported by portfolio growth, favourable asset quality, and reduced credit costs.

Still, challenges loom, including regulatory changes, liquidity constraints, sustained high-interest rates, and delays in resolving wholesale loans, alongside competition from banks.

The Indian residential real estate sector is experiencing robust demand fueled by factors such as improving affordability, urbanisation, and government policies.

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“These forces are set to sustain housing demand over the medium to long-term,” the report noted.

Post-pandemic shifts in consumer preferences towards open living spaces and premiumization, combined with low-interest rates and stamp duty rebates, have further boosted the market. The demand surge has been evident since the pandemic's onset, with residential unit sales reaching a decade-high in CY23.