Home Loan Market Dominated by Five Housing Finance Companies

Seventy-Eight percent of Home Loans are lent out by only 5 housing finance companies (HFC), says Information and Credit Rating Agency of India Limited (ICRA). This is a high percentage, considering that the Home Loans in India market is constitutes of more than 80 players. LIC and HDFC are dominant, making up 57% of the market, and containing assets over Rs.1 lakh crore. The other three HFCs that constitute to the 78% market are DHFL, Indiabulls, and Punjab National Bank Housing Finance. These HFCs make up around 21% of the Home Loan market and each of them have a book size of Rs.15,000 – Rs.50,000 crore.

However experts foresee a change in these statistics after taking into account that more than 25 new Housing Finance Companies have been set-up since 2015.

Eight other companies further down the pecking order constitute to 12% of the Home Loan market. These HFCs have an asset base of Rs.5000 – Rs.15000 crore. The prominent players in this list include Gruh Finance, TATA Capital Housing, ICICI Home, and India Infoline. The ICRA also shows that HFCs that own an asset value of below Rs.5000 crore hold a minor share of the Housing Loan market at 10%.

ICRA estimates that a HFC will require Rs.9000 – Rs.16,000 crore of external capital in order to grow at a compounded rate of 20 – 22% annually for the forthcoming defining years of the housing loan sector. The interior capital generation would be 15 – 16% and the gearing level 8 – 9 times. Most of the requirement of this increment in capital would be for the small to medium HFCs, including the ones functioning in affordable housing. HFCs are in direct competition with commercial banks when it comes to Home Loans and their share in this market has grown progressively. With the incubation of new housing finance companies, particularly for affordable housing, their share in the Housing Loan market is an expanding pie and is predicted to grow at an even faster pace. HFCs’ share when it came to total housing loans was 33% in March 2012 and 37% in March 2017, while the share of commercial banks stooped from 67% to 63%.

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