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In these post-demonetisation days, competition in the home loan market is hotting up. According to Vishal Rampuria, analyst at HDFC Securities, this will result in housing finance companies facing problems in the short term.
“While in the near term, demonetisation will benefit banks, we see the situation normalising in six months, as deposits find better alternatives than current account, savings account (CASA) deposits for banks,” added Veekesh Gandhi, analyst at DSP Merrill Lynch.
Rate war While cut in interest rates by banks is a boon for housing finance companies, as it helps lower the cost of funds, it can also become a bane since a low-rate environment will lead to heightened competition. Rajiv Mehta, analyst at IIFL, pointed out an instance — even as CanFin Homes has slashed its rates by 75 basis points (bps), its spread vis-a-vis large players has narrowed to 15-20 bps.
Going forward, companies focused on affordable housing and/or non-individual home loans, such as CanFin Homes and Dewan Housing Finance are better placed than those that offer retail home loans (read salaried), such as LIC Housing Finance.
The financial performance ofi housing finance companies n the December quarter reflects this trend. CanFin Homes and DHFL reported robust loan book growth at 28 per cent and 17 per cent year-on-year respectively, compared to 15 per cent at LIC Housing.
CanFin Homes reported the highest growth in net interest income and net profit among the three, followed by DHFL and LICHFL.
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