Players in the market believe that there is a strong demand for housing loans, and this in turn augurs well for these companies.
The scrip prices of most companies in the housing finance sector have risen in the recent past. Can Fin Homes moved up from Rs 38.05 on August 14 to Rs 40.00 on November 14, up 5.12 per cent, GIC Housing Finance saw a jump of more than 55 per cent from Rs 21.90 to Rs 33.95, GRUH Finance shot up by 38.51 per cent from Rs 24.15 to Rs 33.45, HDFC witnessed a surge of 14.64 per cent from Rs 455.70 to Rs 522.40 and LIC Housing Finance rose by 19.52 per cent from Rs 143.95 to Rs 172.05 with SBI Home Finance edging up from Rs 15.60 to Rs 15.98.
The market is bullish as the housing sector is seeing a lot of activity with construction (including housing) picking up following a good monsoon. There is also a buzz that a number of institutions have added housing finance companies to their buy list.
Players say that besides institutions, certain brokerages as well as funds are actively buying into the sector. Operator activity has increased on the back of expectations of a good future growth for the sector.
Falling interest rates have enabled the companies in the sector to avail of cheaper funds for their housing finance operations. These loans will help refocus on the middle- and lower-income segment with attractive housing schemes.
Sector watchers and analysts say that the housing finance sector is doing well due to a strong demand for housing loans. The low interest rate regime and tax sops are the two main reasons for this.
Interest rates on housing finance loans are as low as 7-9 per cent, and in some cases, certain companies have also announced special schemes with interest rates as low as 6 per cent.
This, says an analyst, has led to major interest in the sector as interest rates were in the range of 13-14 per cent about two years ago and 18 to 20 per cent a few years ago.
Cheaper borrowed funds have also been instrumental in increasing loan disbursements and yielding improved returns. This and the repeal of the Urban Land Ceiling Act has also boosted demand for housing loans.
