The affordable housing finance segment is likely to grow to Rs 6 trillion in size in the next four years from Rs 1.5 trillion now, India Ratings said today.
This will make the segment a major contributor to the overall housing finance activity.
Affordable housing finance, largely dealing in loan ticket size of up to Rs 15 lakh, will become a large segment for housing finance companies (HFCs) in the next five years, with its market share estimated to increase to around 37 per cent in FY2022, the rating agency said.
Currently, the affordable housing AUM is around Rs 1.5 trillion and it is expected to increase four times to Rs 6 trillion by FY22.
The accelerated urbanisation on account of fast economic growth over the last decade-and-a-half has created massive need for affordable housing, it said.
The agency anticipates a demand for 25 million homes, which is nearly four times of the entire current housing finance stock, over FY17-FY22 in the medium and lower income group categories.
A combination of factors like the government’s financial and policy thrust, regulatory support, rising urbanisation, increasing nuclearisation of families and increasing affordability is converting latent demand into a commercially lucrative business opportunity, it said.
Ind-Ra expects the sector to attract over Rs 200 billion of equity inflows over FY17-FY22 which would support growth.
Allow housing finance companies to fund land acquisitions: Deepak Parekh urges RBI
HDFC chairman Deepak Parekh has reiterated his plea for the Reserve Bank of India (RBI) to allow housing finance companies (HFCs) to fund land acquisitions as it will help reduce the interest rates for developers and lower the cost of homes for consumers.
“To acquire land, developers have to rely on funding by non-banking financial entities and private equity funds, but these are at exorbitant rates. While one appreciates the stress that the banking sector is undergoing on asset quality, it does appear illogical to continue to prohibit HFCs from funding land transactions,” Parekh said in a statement to HDFC shareholders in the company’s annual report.
RBI had prohibited banks and HFCs from funding land transactions fearing a real estate bubble. Parekh said HFCs can provide strong checks and balances and can help reduce the cost of a home for the customer if they are allowed to fund the developer at the time of purchase of the land.
On HDFC, Parekh said that the company hopes to extract greater value from its subsidiaries by exploring listing opportunities, “where conducive.”
Only its banking subsidiary HDFC BankBSE -1.14 % and Gruh Finance its HFC which focuses on affordable home loans are listed besides the parent company. HDFC Standard Life Insurance, the life insurance arm was preparing for a listing before initiating merger talks with Max Financial Services Ltd, the listed holding firm of Analjit Singh -promoted Max Life Insurance Co Ltd.