Competition intensifies in housing loan market, to benefit home buyers

From ET Realty

MUMBAI: There is good news for potential home buyers. New schemes and better deals for customers are set to roll out as a host of fresh entrants intensify competition in the segment.

Fullerton India Housing Finance, part of Singapore’s Temasek Group, is the latest to join the market dominated by the likes of HDFC, State Bank of India and ICICI Bank.

Fullerton, which launched on Wednesday, plans to have 20 branches across seven states in India. Going forward, the company will also adopt alternative distribution channels as well as internet and mobile technology for speedy loan application and disbursal.

With a host of new entrants in the fray, incumbents could see more churn in their portfolio. Some new entrants are likely to take the refinance route to acquire those who already have home loans. At present, the large lenders HDFC, State Bank of India and ICICI Bank are seeing a fair share of their customers shift. In 2016, the new entrants may play upstart with the object of building up scale.

Other corporate houses that have made aggressive plans for the home finance segment are Reliance Home Finance, Bajaj Housing Finance, Aditya Birla Housing Finance, Hinduja Housing Finance and the Tatas, which have had a home finance arm for several years now. Established finance companies which are growing their home finance arms include Magma, Indiabulls, Religare, Indiainfoline, Edelweiss, Muthoot, Mannapuram, and Capital First, all of which have set up housing companies registered with the National Housing Bank.

Worried about the churn, home finance companies have asked the NHB to implement a pre-payment penalty if a loan is repaid within the first two years. The NHB has taken a favourable view of this demand. However, a final decision would be taken by the RBI. Among the incumbents which have built a large position, DHFL is looking at raising equity by inducting a strategic partner and also mopping up funds through a $300-million external commercial borrowing to fund growth. Fullerton India has decided to pump in Rs 150 crore into its home finance company to grow its mortgage portfolio.

“The Indian housing market is a business with significant growth opportunity with multiple drivers, including the launch of satellite and smart cities, move towards nuclear families and an increase in disposable income among the middle class fuelling this growth,” said Shantanu Mitra, chairman, Fullerton, explaining the reason for the company’s diversification into housing. Last month, in an interview with TOI, Sam Ghosh, CEO, Reliance Capital, said the group plans to grow the mortgage book 80% to Rs 9,000 crore by March and Rs 15,000 by FY17.

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