New Delhi: State Bank of India (SBI) has emerged as the market leader in the housing finance business, snatching market share from housing finance companies (HFCs) like HDFC.
Data shows SBI remains the leader in mortgage finance with an overall market share of 20.2 per cent in FY18, up from 17.6 per cent in FY17, while the share of most others came down. SBI is closely followed by Housing Development and Finance Corporation (HDFC) at 18.8 per cent market share as of March 2018, down from 19.4 per cent in FY17.
SBI’s home loan book today stands at Rs 3.13 lakh crore, which is more than double that of private sector peer ICICI Bank.
SBI has been targeting mid-income individuals, preferably salaried with good three-year credit history, and lower ticket size of Rs 20-30 lakh (mainly affordable housing customers) by offering them fairly attractive interest rates on their existing mortgage loans, according to brokerage Emkay Global Financial Services.
In a way, the bank has targeted the core customer base of HFCs and this would, interestingly, keep pre-payments for HFCs at elevated levels, the brokerage said.
Banks in general have been increasing their market share in the mortgage business for the last one year. During April–December 2017, banks had notched up 18.7 growth in mortgage value against 14.3 per cent growth by HFCs. The banks share--including both private and public sectors--in the overall mortgage market improved to 53.6 per cent in December 2017 from 52.6 per cent in March.
As competition intensified in the mortgage business, many non-banking finance companies (NBFCs) have started focusing on micro enterprises, a segment largely avoided by banks.
Emkay Global, which recently conducted meetings with a few HFCs, NBFCs and lenders to micro, small and medium sized enterprises (MSME), also dispels the notion that HFCs and NBFCs are facing a fund shortage on banks’ reluctance to lend, forcing them to raise funds from the capital markets. The brokerage says there is absolutely no shortage of funds, especially for better-rated NBFCs. “Even banks under prompt & corrective action (PCA) are consistently disbursing funds up to the existing sanctioned limits to corporates, including NBFCs,” the brokerage said in a note.
After being cautious for over a year, lenders are gradually becoming comfortable towards SME/MSME lending. “Although there is no defined ticket size for SME/MSME, the NBFCs in general are favouring Micro SMEs. Interestingly, Micro SME is more of an extension of the existing micro finance business for most NBFCs, with relatively higher ticket size of Rs 3-5 lakh.
This segment is the least favoured by banks due to the unfavourable risk-reward and lack of operational efficiency. Hence, NBFCs are having a better run. Also, with an improvement in the macro-economic scenario and currency back in circulation, probability remains high for a steady rise in recoveries from previous years’ write-offs for most NBFCs,” the note said
The brokerage says it remains cautious on mono-line HFCs and prefers asset financing companies for their diversified book, favourable asset-liability management profile and ability to price risks. It said it prefers Bajaj Finance, Shriram Transport Finance, L&T Finance, Edelweiss and Magma Fincorp in the NBFC space.
