HFCs to generate 12 to 17 pc RoE in FY22-23: Motilal Oswal

Mumbai (Maharashtra) [India], January 15 : Housing finance companies (HFCs) are expected to generate 12 to 17 per cent return on equity in the next two years as credit costs normalise, Motilal Oswal Financial Services said on Friday.
Over the past two years, the top two HFCs have outperformed on account of strong parentage and access to debt capital. These players have been able to capture the revival in real estate space with disbursements surpassing pre-Covid levels.
Motilal Oswal said it expects these players to disproportionately benefit from a pick-up in real estate volumes and consolidation in the builder space.
While on the whole, housing finance sector lost market share in retail home loans to banks post the IL&FS crisis. But the top two HFCs clearly outperformed its peers with 700 basis points market share gain within the space.
These players enjoy strong parentage and comfortable access to liquidity at attractive prices. Most companies are confident of restricting the stress pool in retail loans to less than two to three per cent of the overall book.
Over the past four years, housing sales in India's top seven cities have exceeded launches, resulting in a meaningful decline in inventory overhang. While sales plummeted 65 per cent year-on-year after the lifting of COVID-19 lockdown restrictions, there are early signs of a revival now.
Sales in Mumbai have picked up since September 2020 and even grew in November, said Motilal Oswal.
With the government's focus on 'Housing for All' by 2022, affordable housing has seen strong growth over the last six years.
Smaller players like Can Fin Homes, Aavas Financiers, Aadhar Housing Finance and Repco Home Finance have created a niche in this space, and are capitalising on this multi-year opportunity.