Despite growing competition from banks in the home loan segment, HDFC remains firmly in place to benefit from the government's strong focus on affordable housing.
The company is the largest, among housing finance providers in India. It has also earned the reputation of a rock-solid financial institution. Not only in India but the world over.
During the June 2021 quarter, HDFC’s individual loan disbursements grew 181% year on year (YoY) on the back of growth in both the affordable housing and premium segment.
The company's management said there was a preference for ready to move in properties compared to under-construction properties.
The demand for home loans remains strong, and disbursements have picked up with the unlocking of respective locations.
While disbursements during April and May of the current financial year were somewhat impacted, the business reverted to normal in the months of June and July. July 2021 disbursements were the highest ever in a non-quarter end month.
HDFC also said it received a loan of US$250 m from International Finance Corporation (IFC), the private sector investment arm of World Bank Group, to expand its green affordable housing portfolio.
The funding will help improve access to finance, while also supporting India’s climate goals. As much as 25% of the financing has been earmarked for green affordable housing.
#2 Can Fin Homes
Can Fin Homes is a housing finance company promoted by Canara Bank. The company focuses on providing funding to low and middle group individuals & first-time homebuyers.
As around 90% of the company’s overall portfolio constitutes housing loans, the company is in a perfect position to capitalize on the boom in affordable housing.
Due to its strong parentage, Can Fin enjoys strong financial flexibility and has been able to raise funds through diversified sources at competitive rates.
It has also had comfortable asset quality parameters over the years as it gives loans to mostly salaried customers. Salaried professionals form 73.2% of its loan portfolio.
Furthermore, all its loans are backed by adequate security leading to healthy asset quality.
The company’s average ticket size of loans in the housing loan segment stood at ₹19.8 lakh in the financial year 2021, with an average Loan to Value (LTV) ratio of about 64%.
In its latest quarterly results, Can Fin Homes saw its loan disbursements jump over 100% YoY to ₹8.9 bn as against ₹4 bn in the year-ago period.
New approvals also zoomed over 200% YoY to ₹8.3 bn from ₹2.6 bn in the June 2020 quarter.
#3 Godrej Properties
Godrej Properties (GPL) is the real estate development arm of the Godrej Group. The company has a fair share of projects in the affordable housing category.
Due to its ties to the Godrej Group, the company enjoys the lowest funding cost in the sector which bodes well for the business.
The company has been focusing on increasing its market share in focus markets. It has significantly increased its market share in the real estate market of NCR Delhi. It has increased its market share in Bangalore and Pune as well.
For the June 2021 quarter, Godrej Properties’ gross sales bookings declined 68% YoY to ₹5 bn due to the second wave of Covid-19 and an absence of subvention schemes and new launches during the quarter.
However, sales bookings have picked up again from July 2021 onwards and with four to five planned launches in the September quarter.
With ₹41 bn of cash and liquid investments as of June 2021 post the recent qualified institutional placement (net cash of ₹0.2 bn), the company is well-positioned to augment its land bank.
#4 State Bank of India
Any talk of affordable housing will be incomplete without mentioning the country’s largest and oldest public sector bank, the State Bank of India.
The bank has the strong support of the Government of India (GoI), both on an ongoing basis and in the event of distress, as GoI is its largest shareholder.
As a result, it has a wide reach in rural and semi-urban areas. So much so that that 40% of all PMJDY (Pradhan Mantri Jan Dhan Yojana) accounts are with the bank.
Home loans account for the largest chunk of SBI’s asset book (23%). SBI plans to double the size of this portfolio over the next five years, from ₹5 tn in 2021 to ₹10 tn by 2026.
To achieve its target, it’s strengthening its capabilities to improve volumes and delivery. Recently, the bank announced various festive offers for prospective home loan customers that could further boost buying sentiment.
As affordability improves, the demand for affordable and mid-segment houses is expected to go up.
The bank has also removed the distinction between a salaried and a non-salaried borrower. Now, there is no occupation-linked interest premium being charged to prospective home loan borrowers.
#5 Ashiana Housing
Ashiana Housing (AHL) is a real estate company based in New Delhi. The company has built a strong brand over the last 42 years through its impeccable track record.
While most real estate players focus on metros, AHL has completely avoided them. AHL’s focus has always been Tier II and Tier III cities.
The company only enters those cities which are growing industrial hubs. Even in metros, their projects are on the outskirts of the city.
These niche areas have meant less competition and allowed AHL to dominate the market for long periods. This makes it an excellent play on the affordable housing megatrend.
Ashiana has a prudent capital allocation policy which ensures it has a strong balance sheet. It preserves cash during upcycles which helps it ride down cycles.
Due to the strength of the balance sheet, the company’s ability to hold inventory through cyclical downturns is enhanced.
AHL currently has a healthy pipeline with 53.3 lakhs sq. ft. land available for future projects and 57.7 lakhs sq. ft. of land available for future development.
India’s property market is on a rebound after being in a down cycle for the last six years as a series of headwinds had hurt demand for new houses and apartments.
The sector has been bullish recently as interest rates have been low and government policies have been supportive.
The Nifty Realty index has risen nearly 130% in the past year, far outpacing the Nifty 50 index, which has gained 55% during the period.
With the second wave subsiding, sales are expected to revive which in turn will benefit both real estate developers and housing finance companies.
In fact, according to Brijesh Bhatia, Research Analyst at Fast Profits Report, housing finance stocks are offering a great short-term trading opportunity right now,
These stocks have broken out on the charts with a strong bullish momentum and have a lot of potential to go higher.