Housing Finance Companies – Sector Report By IDBI Capital

The demographic drivers for housing demand in India have remained fairly unchanged, particularly the favourable demographics (favourable risk profile for mortgages due to young population) and rising prosperity (sustained move towards becoming a middle income country). While housing finance has been a rare growth driver for both banks and HFCs in an otherwise tepid growth scenario, it looks to sustain a stronger trend as someof the new structural changes begin to take effect over the medium term. Prominent amongst these are the PMAY-G & U, Real Estate Regulation Act as well as the innovative changes being ushered in by various state governments for acquiring land for housing projects. These changes are likely to provide a strong foundation for housing demand over medium term.

We initiate coverage on HDFC (BUY, TP Rs1,429), LICHF (BUY, TP Rs560), and Repco Home Finance (ACCUMULATE, TP Rs820). HDFC and LICHF are firmly entrenched HFCs with strong operating history while Repco Home Finance, though relatively younger has created a niche for itself by focusing on the low income as well as self-employed category. We believe these companies are a strong play on the dominant themes in housing finance – urbanization, rising prosperity, and affordable housing.