A CRISIL study forecasts a healthy growth in the housing finance sector, and reveals the past growth in the prime, mass-market and affordable segments. The study also shows the distribution of market share among urban, semi-urban and rural segments, as well as among public and private sector banks and HFCs.
The housing finance market in India is expected to have a CAGR of 13% -15% from fiscal 2023 to 2027, according to an analysis of the sector in India done by CRISIL. The study points out that housing finance market clocked a healthy ~12.6% CAGR growth in credit outstanding during fiscals 2019 -2023, on account of rise in disposable incomes, healthy demand and greater number of players entering the segment.
The study, carried out for Bajaj Housing Finance, says over the past 2 fiscals, housing finance segment has seen favourable affordability on account of stable property rates and improved annual income of individual borrowers. It says: “The overall housing finance segment credit outstanding is ~Rs28.7 trillion as of FY23, which increased during fiscal 2023. The overall housing market grew 16.7%, led by the aspirations of a growing young population with rising disposable income migrating to metro cities and elevated demand in tier 2 & 3 cities as well.”
DEMAND FOR LOANS STABLE
The study notes that demand for home loans remained largely unscathed despite a sudden rise in repo rates. Moreover, the income of the salaried class remained largely intact despite the economic slowdown caused by the covid pandemic and higher inflation, thereby allaying lenders’ concerns about any deterioration in asset quality. CRISIL noted that the Government of India has been pursuing various social welfare schemes and initiatives to enhance the flow of credit to the housing sector and increase home ownership in India.
FASTEST GROWTH
The study states that prime housing finance segment witnessed the fastest growth in housing finance from FY19-23. The segment (loans above Rs5 million) had grown at a CAGR of 19.5%, followed by loans in the mass market housing segment (loans between Rs2.5-5 million) which grew at a CAGR of 15.9%, and affordable housing segment (loans less than Rs2.5 million) growing at a rather slow pace of 5.6% during the fiscals. It added that market share for the ticket brackets in value terms was equally distributed with both affordable and prime housing segment accounting for 34% market share each and mass market housing with 32% share in overall housing.
URBAN REGIONS TOP
The study revealed that urban regions account for the highest share (~66%) in housing finance outstanding, followed by rural regions with ~20% share. “As of 9MFY24, urban regions accounted for the highest share in overall housing finance credit with 65.6% share, which was followed by rural regions which accounted for 19.6% share, semi-urban regions accounted for 9.1% share in credit outstanding,” the study said.
It added that among the various tiers, fastest credit growth during FY19-23 was witnessed in rural regions, which grew at 15.3% CAGR, followed by semi-urban regions at 15% CAGR. Urban regions saw a 11.4% CAGR.
The study observed that as of 9MFY24, Maharashtra accounted for the highest share in overall housing finance outstanding with ~22% share, followed by Karnataka, Tamil Nadu, Telangana and Gujarat. In terms of asset quality, among the top 20 states, Telangana had the highest asset quality with 90+ Days Past Due, or DPD at 0.9%, followed by Assam and Rajasthan with 1.0% and 1.3% 90+ DPD respectively. While Tamil Nadu, Delhi and Madhya Pradesh had the lowest asset quality among top 20 states with 4.0%, 3.3% and 3.1% 90+ DPD respectively. Maharashtra accounted for the highest share in housing finance credit as of 9MFY24, with ~22% share.
PUBLIC SECTOR BANKS LEAD
The study said as of 9MFY24, public sector banks accounted for the highest share in overall housing credit (43.1%), followed by private sector banks with 35.6% share and housing finance companies with 18.8% share. However, during fiscals 2019-23, among major lenders private sector banks witnessed the fastest growth in housing finance credit with a CAGR of 16%, followed by public sector banks with 13.1% CAGR and housing finance companies with 10% CAGR.
The study said in FY20, GNPAs of the overall housing loan portfolio increased sharply from 1.6% to 2.3% due to slippages as consumer perception of the general economic situation, employment scenario, and household income had plunged. Housing finance companies also faced asset-quality challenges, leading to a peak rise of ~60 bps in GNPAs to 3.9% in FY21. Subsequently, the asset quality of the overall housing finance improved to 2.3% in fiscal 2022, and 2.0% in FY23.
The study said the housing shortage in the country has only increased since the estimates at the time of the 12th Five-year plan. It quoted a report of RBI-appointed Committee on the Development of Housing Finance Securitisation Market (September 2019), which said the housing shortage in India was estimated to increase to 100 million units by 2022. Majority of the household shortage is for lower income group and economically weaker sections with a small proportion (5-7%) of the shortage coming from middle income group or above.
