Rs 84-lakh-crore housing bonanza attracts Piramal loan bet

Piramal Enterprises leads gains on S&P BSE 200 this quarter

Indian billionaire Ajay Piramal wants to sell mortgages and build affordable homes as the drugs-to-data conglomerate seeks to ride an estimated Rs 84-lakh-crore ($1.3-trillion) housing-investment boom.

Prime Minister Narendra Modi's government is putting a "huge emphasis" on affordable housing to drive job creation and economic growth, said Piramal, chairman of Piramal Enterprises Ltd, in an interview. "We'll ride this wave," he said, pointing to the company's ties with developers across cities and its deep pockets.

Closely-held Piramal Realty Pvt Ltd is considering affordable housing projects, while the listed Piramal Enterprises is awaiting a licence to offer loans to home buyers, he said. Rising incomes and a government push to house the nation's billion-plus people will require 60 million new homes by 2024 and unleash investments of as much as Rs 84 lakh crore over the next seven years, according to estimates by CLSA India Pvt.

"We are looking at humongous growth in the housing finance segment," said Jignesh Shial, a Mumbai-based analyst with Quant Broking Pvt Ltd. "This market in India is far from its saturation point."

Piramal isn't alone in spotting the opportunity with the government offering a slew of incentives to achieve its goal of housing for all. These have included interest subsidies for home loans and making developers of affordable housing eligible for state incentives, tax benefits, and institutional funding.

More than 16 mortgage financiers started operating in the country in the two years to June, taking the total to 75, according to data compiled by the National Housing Bank. The sector is dominated by Housing Development Finance Corp (HDFC), the largest mortgage lender by assets, with outstanding loans of nearly Rs 3 lakh crore ($46 billion) as of March 31.

Still, mortgage penetration in the South Asian nation stands at nine per cent of nominal gross domestic product, compared with 32 per cent in Malaysia, 56 per cent in Singapore and 68 per cent in the US, according to an HDFC presentation.

There are probably about seven or eight companies with a book in excess of Rs 10,000 crore, Piramal said. "There is a space for a company willing to play a larger canvas and, because of the funding we have and our track record, we should be able to come in that space."

The mortgage push is part of Piramal's efforts to capitalise on a "once-in-a-lifetime opportunity" to build up the financial services business as Indian lenders, battling the world's worst stressed-asset ratio, become cautious at a time of rapid economic growth.

"So much of the capital is tied up with these non-performing assets that it's difficult for banks to lend as much," he said. This has "left an open space" for non-banking financial companies.

The contribution of financial services to Piramal Enterprises's revenues has nearly quadrupled to 39.2 per cent in the year ended March 2017 from 10.6 per cent in 2013, data compiled by Bloomberg show. It grew its loan book 87 per cent to Rs 24,400 crore in the year ended March from a year earlier. Bloomberg