HFCs see realty sector expanding with tech adoption and govt backing

The housing finance industry is expected to register robust growth in the coming years, driven by the escalating demand in premium and luxury housing sectors and the rapid pace of urbanisation sweeping across India.
 

“With improved connectivity and greater travel options, development is spreading to previously underserved areas, sparking a surge in housing demand,” says Manish Jaiswal, managing director and chief executive officer, Grihum Housing Finance. The rapid urbanisation, propelled by extensive infrastructure development throughout the country, has put the sector on the brink of remarkable growth, he adds.
 

Housing finance companies underscore their healthy capital positions amidst heightened investor interest in the segment.

Additionally, they welcome the government’s plan, which is similar to the Credit Linked Subsidy Scheme (CLSS), foreseeing 

it as a catalyst for further growth.
 

In the interim Budget for financial year 2025 (FY25), Finance Minister Nirmala Sitharaman had announced a scheme aimed at assisting deserving sections of the middle-class living in rented accommodations, slums or chawls, or unauthorised colonies to realise their dream of homeownership.
 

“The government’s plans for a scheme akin to CLSS is the best thing to have happened to the sector,” says Suresh Iyer, MD and CEO, CanFin Homes. This initiative, he adds, will bolster supply in the affordable housing segment. Add to that the considerable influx of capital into the industry due to greater investor interest, and the prospects appear bright, Iyer notes.
 

According to the National Housing Bank (NHB), India’s housing finance landscape has rebounded following intermittent disruptions caused by the Covid-19 pandemic. The outstanding individual housing loan portfolio of primary lending institutions registered an annual growth rate of 14.88 per cent during FY23. For housing finance companies, it grew by 15.29 per cent to Rs 928,542 crore as of March 31, 2023.
 

The individual housing loan disbursements by housing finance companies have shown a consistent uptrend, rising from Rs 1.89 trillion in FY20 to Rs 3.11 trillion in FY23.
 

However, the growth in the affordable housing finance segment remains a concern amidst sluggish sales, which can be attributed to escalating construction costs and land prices.
 

“The biggest challenge for the affordable housing finance segment is the rising cost of land and construction,” notes Ravi Subramanian, MD and CEO, Shriram Housing Finance. “This is the major reason for the decline in the number of launches 

in the affordable segment in the recent past.” 
 

For instance, of the Rs 35,701.20 crore disbursed in all, NHB allocated Rs 12,612.96 crore under Affordable Housing Fund against about 107,000 dwelling units; Rs 818 crore was disbursed under green housing.
 

The companies say that the dip in sales in the segment has resulted in builders focusing on the premium and mid-sized segment, further dampening growth in affordable housing. 
 

Digitally fortified
 

The housing finance companies also emphasise the need for digital transformation within the sector, and highlight the role of digitisation in curbing frauds and increasing transparency in property transactions.
 

“Lack of digitisation is definitely a concern. There are cases of fraud, which we have to deal with due to lack of digitisation,” says Iyer of CanFin Homes.
 

The NHB has asked housing finance companies with assets exceeding Rs 1,000 crore to adopt an early warning signals (EWS) framework to combat financial frauds and prevent accounts from turning into non-performing assets (NPAs).
 

“Initiatives such as the digitisation of judicial reforms, especially for expediting cases under Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest), can unlock economic multiplier effects,” says Jaiswal. “Establishing a digital neural network to integrate judicial systems with bureaucratic, administrative, and police records can expedite processes and ensure the quality of credit."
 

Echoing the sentiment, Subramanian stresses the importance of leveraging digital tools to assess borrowers in the affordable segment. He cites the inadequacy of conventional tools in gauging the creditworthiness of these buyers who are mostly from the unorganised sector.
 

The sector, as it looks to grow, is counting on promising government interventions and tech support to guide its ambitions.