Housing Finance Companies’ Assets Under Management Expected to Grow 10-12% in FY23, Says CRISIL

Assets under management (AUM) of housing finance companies are expected to grow 10-12% in this fiscal year 2022-23, compared to 8% in the last fiscal year, mainly due to home loans, which could grow by 15 %. cent over a year, said CRISIL.

In the last fiscal year, HFC growth has been a two-part story: a stunting of about 2% (annualized) in the first half due to the second wave of the pandemic, and a V-shaped growth of 14 % (annualized) to the second. half.

“Structural factors driving end-user housing demand remain intact this fiscal year despite the impact of rising house prices and interest rates. And despite recent increases, interest rates remain below previous cycles and have not had a significant impact on client interest,” said Krishnan Sitaraman, Senior Director and Deputy Director of Ratings, CRISIL Ratings.

Despite the growth, housing finance companies are expected to continue losing home loan market share to banks amid stiff competition.

Although access to finance is not a big challenge for most housing financiers, a competitive cost of borrowing is crucial compared to banks, which benefit from low-cost deposit financing.

HFCs have already conceded 400 basis points of market share to banks over the past four fiscal years, bringing banks’ share to 62% in March 2022.

It is unlikely that this trend will reverse in the short term. Banks are expected to further gain market share with HDFC Ltd, the largest HFC, which is expected to merge with HDFC Bank in the next fiscal year.

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, growth in assets/books is likely to be less than growth in assets under management.

Meanwhile, one segment where HFCs have grown relatively faster is in affordable home loans, where competition from banks is limited.

Affordable Housing Financiers (AHFC) has therefore seen relatively better growth of 12-15% in the recent past, despite moderating from earlier levels. Given their relatively small footprint and strong underlying demand, AHFCs are expected to continue to grow faster than traditional HFCs.



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