When a blue-blooded buyout firm such as Carlyle Group buys into a state-run company, that too a substantial stake, it is a sign of what's in store for the company and probably the industry as well. When Carlyle bought a 49 per cent stake in PNB Housing Finance this year, not many knew what's on the cards.
But as the National Housing Bank hands out eight licenses for home finance companies it gets clearer that the next big boom that investors are betting on might be mortgage lending.
The houses of Bajaj, Hinduja and Temasek-backed Fullerton are among the ones that are jumping on to the housing bandwagon, raising the profile of a segment that has till now remained low-key.
Take the case of CanFin Homes, the subsidiary of Canara Bank. Its stock has more than doubled in the past year, when the parent has gone down in value by half in the same period. Shareholders include Infosys Technologies founder NR Narayana Murthy's investment fund Catamaran Investment.
"India has not seen such a cycle in housing finance in a long time," says Sriram Kalyanaraman, chairman of housing finance sector regulator National Housing Bank, which has licensed Bajaj and Hinduja to begin a housing finance company.
The sudden surge in interest on housing finance companies may be that they give a pure-play, hassle-free and fool-proof exposure to financial services as well as the real estate business in the country. A mortgage company model insulates them from the bad loans of banks which are the biggest home loan makers.
It also saves direct exposure to real estate shocks as repayments by individual borrowers have been impeccable. A case in point is the performance of Housing Development Finance Corp, a stock that has surged 719 per cent in the last decade despite the credit crisis setback.
Low defaults, high return on assets, high growth and high return on equity are the prime reasons for investors to bet on the sector. HDFC's gross NPA percentage is 0.7 per cent, Indiabulls'stands at 0.9 per cent while Dewan Housing's is at 0.8 per cent.
The government's 'Housing for All' campaign has added some glitter to the already shining mortgage industry given that much of India still doesn't have homes that don't leak during rains. The potential is captured in the housing credit data which in India is at 8 per cent of the GDP when in neighbouring China it is 18 per cent.
"The addition of this affordable housing segment could push the annualised growth of the housing finance sector from the 18 per cent levels seen now to 21-25 per cent over the next seven years and this new segment could account for 2237 per cent of the overall housing credit depending on the success of implementation of the schemes," said Vibha Batra, banking analyst with rating company Icra
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Reference
http://articles.economictimes.indiatimes.com/
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