NEW BATTLEGROUND

NEARLY 90% OF HOUSING FINANCE COMPANIES ARE NOW FOCUSING ON THE AFFORDABLE SEGMENT. WHAT WAS ONCE A NICHE MARKET IS NOW OVERCROWDED AND RISKY

- BY ANAND ADHIKARI

THE HOUSING FINANCE industry is undergoing a churn. CEOs of PNB Housing Finance, IIFL Home Finance, and TPG-backed Grihum Housing Finance have quit over the past one year. The challenge, though, is not limited to top exits. Housing finance companies (HFCs), facing the heat from banks, are being forced to pivot to the affordable housing segment to stay relevant. Banks can access funds at a lower cost than HFCs.

There is a good reason for the shift. India's housing finance market, with outstanding loans of ₹33 lakh crore, is projected to grow at a 15% compound annual growth rate (CAGR) over the next decade on the back of housing shortage and the government's Housing for All target, up from 13% CAGR between 2019 and 2024. Within this, the affordable segment is expected to pick up after years of anaemic growth due to collapse of non-banking financial companies such as IL&FS and Dewan Housing, followed by the pandemic, which dragged growth below 6% between 2018 and 2023. It is now expected to grow at double this rate by FY27, according to a Crisil estimate. EY India pegs the segment at ₹10.6 lakh crore as of December 2024, that is, 34% of the total housing finance market.

THE AFFORDABLE SHIFT

With banks pricing out HFCs from super prime (high net worth individuals) and prime segments (salaried borrowers) in big cities, 90 out of 100 HFCs have shifted to the affordable segment, say industry experts. There has been a big shift among leading HFCs such as PNB Housing and Canfin from super prime and prime segments to the affordable segment in smaller towns and cities, they say. "Over the next three years, PNB Housing's portfolio will likely be concentrated entirely in emerging and affordable markets," says Girish Kousgi, MD & CEO at PNB Housing, who is leaving the company in October.