Summary of Business
We are a technology driven affordable housing finance company targeting first time home buyers in low and middle-income groups. We primarily offer customers housing loans for the purchase or construction of homes, which comprised 91.5% of our Gross Loan Assets, as of September 30, 2019. Our Gross Loan Assets have grown at a CAGR of 69.8% between the financial years 2017 and 2019 and increased from ₹ 8,473.16 million as of March 31, 2017 to ₹ 31,133.76 million as of September 30, 2019.
Summary of Industry
The Indian housing finance market experienced a healthy growth in housing loan outstanding of approximately 20% over Fiscals 2015 to 2019. CRISIL Research expects housing loans outstanding to grow to ₹ 28.4 trillion by Fiscal 2022, at 15% CAGR in
the next three years. By Fiscal 2022, CRISIL Research expects outstanding credit to increase at approximately 13% CAGR to ₹ 12.4 trillion. Growth would be driven by improved supply and demand of affordable houses, Government impetus to the segment through various incentives given to developers and first-time homebuyers and initiatives towards affordable housing such as PMAY. (Source: CRISIL Report)
We see in markets that many try to find next Infosys, HDFC but they are only one, a company is made blue chip with its grip over the market and earnings. Market at the end sees and loves earnings. And in the long-run only profits matter. I don't think that Real Estate has recovered the hit of 2008, with excess liquidity means easy money creates a problem for the World Economy every 10-20 years. At present we are seeing such market, where fundamentals are put aside and even loss-making companies or the IPOs are running like there is no end. We are going through a period where the money printing spree is taking markets up and up, on the basis of technicals, I also believe that the market will go even further only to make things worse for the bad companies and its holders. The market will sooner or later make weak players exit very badly. The problem with Real Estate is the black economy which has made housing only a dream for many, there is no doubt that there is excess supply than demand, prices have been stagnant for quite a time, now in Corona we have seen prices to fall heavily, businesses shutting down, the commercial estate is also taking hit. Also investing in real estate generates a return of less than 5% after taking into account depreciation and other expenses. We can easily point out seeing our surroundings that there is a lot of unsold inventory lying idle, there are many projects where the money of investors or probable owners have been locked up, only when challenges of real estate are solved industries associated around it would earn something.
Now coming to the Home First Finance, the IPO is fairly priced. Concentration in Gujarat and Maharashtra should be a concern considering the major players like HDFC and LIC having a reach of Pan India. I will wait and see the company's performance after listing. Because as the market is overly priced, one should go with blue chips and established names in the market. There is no doubt that we need housing for all but also the Government's focus on affordable housing is needed for the betterment of the country, which may give some boost to housing finance companies.
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