Loan disbursals by Can Fin Homes, Indiabulls Housing Finance, and LIC Housing Finance in the past quarter suggest that the impact of demonetization on the real estate industry wasn't as bad as feared. Although the rate of growth they posted was lower than in the past, given the uncertainty, it still appeared strong.
Can Fin Homes report a 28% increase in its loan book in the December quarter, while Indiabulls Housing Finance posted 30% growth and LIC Housing Finance a 15% increase? Mortgage finance companies reported strong numbers on the back of lower cost of funds, robust growth in loans and stable asset quality.Banks have cut interest rates, which is a boon for housing finance companies as that reduced their cost of funds and led to higher margins.Also, while banks were busy managing cash post demonetization, HFCs focused on growing their portfolio.
"We did not see any impact of demonetization as the number of loans sanctioned in December is more than the same month the previous year," said Sunita Sharma, chief executive of LIC HFL. With the cash situation improving in the market, housing finance companies have seen, as per CIBIL, home loan inquiries going back to where they were before demonetization in October.
"Demonetisation is behind us, we are seeing inquiries coming back, and expect 18-20% growth by the end of financial year," said Kapil Wadhawan, chairman of DHFL.
The macro environment is extremely favorable for housing finance companies. Government incentives under the Pradhan Mantri Awas Yojana have also given an impetus to the sector. "Housing finance companies have a single product mindset, so they would continue to remain single product focused," said Gagan Banga, vice chairman of Indiabulls Housing Finance.
While there was initially a fear of deterioration in asset quality, post demonetization the local collection levels was not as bad as feared.Also, all HFCs maintained stable levels of non-performing loans during the quarter.