Takeaways from Housing Finance Day
We organized Housing Finance Day on November 27, 2020 to provide a closer perspective on the velocity of housing demand across key markets. The invitees included Regional and Pan-India DSAs, Housing Finance Expert and a niche HFC. All of them confirmed that housing demand has substantially improved in recent months across affordable to mid-income segments, and exuded confidence about traction sustaining in the remaining part of the fiscal. Given the prevalent high divergence in the effective home loan rates between banks, large HFCs and other players, the housing industry is witnessing accelerated market consolidation amid improved growth and increased BT activity. Large housing finance players like HDFC, SBI, ICICI Bank, Axis Bank and LIC HF are witnessing strong growth by grabbing the creamiest layers of customers (both salaried and self-employed).
Main Takeaways (session-wise highlights in the note)
- Housing demand has revived significantly underpinned by sustained economic revival, ebbing fear of job loss/income impairment, positive steps taken by the Center and some large states, historically low interest rates and enticing schemes /deal closures being offered by many builders.
- Demand revival witnessed across large markets (particularly Mumbai, Delhi-NCR, Bengaluru, Pune and Chennai) and in Tier 2-4 towns.
- Traction in big cities led by Salaried customers and growth in smaller towns driven by the self-employed customers. Demand improving for apartments (ready, near completion and re-sale) and plot development.
- Participating DSAs were confident about demand recovery not only sustaining but also strengthening over ensuing months.
- Marked inequality between the home loan rates of Banks/Large HFCs and mid-sized HFCs/NBFCs causing inequality in loan growth trends with increase in Balance Transfers.
- Banks focusing on internal customers who might have taken a home loan from another player for direct BT (without DSA). Loan takeovers even seen in affordable housing and cases where principal outstanding has come down materially.
- Banks and Large HFCs would likely remain aggressive as difference in effective interest rate offered remains high. LTV reduction only by few players
- Bengaluru was a Rs35-40bn housing finance market per month before Covid. Top four financiers are HDFC, SBI, ICICI Bank and Axis. Salaried people form majority of the housing demand. CAT A & B developers (Sobha and Prestige) getting a strong response to enticing schemes. No major increase in BT in this market.
- Chennai was a Rs40-50bn housing finance market per month before Covid. It is doing around Rs30bn currently with business picking up substantially after September. HDFC, SBI and LIC HF are large players. Demand improving for mid-sized apartments and plots, across salaried and non-salaried customers. Chennai is a conservative market (preference for G+2/G+3 buildings and lower LTVs).
- One of the largest retail loans distributor in India is witnessing strongest traction in home loans (October disbursement up 50% yoy). It executed large quantum of disbursements for HDFC and ICICI Bank. BT share has increased from 10-15% pre-covid to 20-25% now. Though KMB is offering one the lowest RoI of 6.75%, it may not have the capacity to process large volumes.
YES Securities -Housing Finance Day Takeaways - 20201201