Big firms throng mortgage mart

Growing middle class and housing shortage trigger race in home loan segment.

A clutch of foreign and domestic players is entering the mortgage finance market and vying for a share of the robust home loans segment.

The major companies including US-based E*Trade (through IL&FS Investsmart), AIG, India Infoline, Mahindra & Mahindra Rural Housing Finance, DBS Chola, Fullerton India, Barclays Finance and Societe Generale, among others.

Rapid growth in the mortgage sector, coupled with the 10th Five-Year Plan estimates a shortage of 22 million dwelling units, is luring these entrants to finance the Indian middle class dream of owning residential property, according to experts.

While most global players have entered through the acquisition route "" Barclays bought Chennai's Rank Investments, AIG bought Weizmann Homes, E*Trade bought into IL&FS Investsmart "" others are entering the home loan market through joint ventures. For instance, BNP Paribas formed a joint venture with Sundaram Home Finance and Societe Generale forged a tie-up with the Apeejay group.

Recently, India Infoline received $77 million (Rs 300 crore) from emerging markets expert Richard Chandler's Orient Global, a part of which will be utilised for India Infoline Housing Finance "to provide support for the growth of housing for the Indian middle class".

Currently, the market size of housing finance is estimated to be close to Rs 1,50,000 crore, which accounts for only 30 per cent of the total market requirement (this is the formal sector).

There are close to 42 players in the home loan segment, of which only seven are very active, including HDFC, LIC Housing, GIC Housing, Dewan Housing, Can Fin Homes, Gruha Finance, PNB Housing Finance and Hudco.

"We already have a non-banking finance company licence and we will focus in the area of financing the customers' needs and mortgages," IL&FS Investsmart MD and CEO Leslie Whiteford had told Business Standard in an interview last week.

A senior executive of National Housing Bank (NHB), which regulates housing finance institutions, said it was looking to allow stable players with disciplined lending to tap the domestic market.

"We are looking at stable players with disciplined lending. The market should be served in a sustainable manner as the size of the market is huge and still quite under-penetrated," he said.

Market players said the potential in the mortgage segment was tremendous, which was attracting a lot of new players into the segment.

Over a period of time, players may keep 70 per cent of the risk in their books and will offload the rest 30 per cent in the market.