Ambit Corporate Finance Pte. Ltd.
SECTION 3 : MARKET TRENDS
Brief review of the performance
The housing sector plays an important role in the economic development of
the country. Every rupee invested in housing adds 78 paise to the GDP.
Over 269 industries are directly or indirectly dependent on the housing
There is an estimated shortage of 20 million housing units in the country
with an estimated investment requirement of over Rs 1500 billion. In this
context it is important to note that that the organized housing finance industry
barely accounts for 30% of the home loans disbursed in the country.
The last few years have seen the home loans market growing at a CAGR of
over 30 percent. The growth has been mainly fuelled by certain fiscal, social
and regulatory drivers:
• Changes in demographic profile including increase in the rate of household
formation due to structural shift from joint family system to nuclear family
• Ever increasing middle class, migration of population and increasing
urbanization resulting in acute shortage of housing units
• Increase in disposable income levels due to decrease in marginal tax rates
and increase in total income levels
• Tax benefits and other fiscal incentives announced in the Union Budgets
• Increasing affordability of housing property purchase due to declining
interest rates and stable property prices
• Decline in the average house cost to annual income ratio to around 4-5
from 11-14 during the last decade resulting in an affordable EMI as a
percentage of monthly income
• Aggressive lending by banks to the housing sector due to lower credit
offtake by the corporate sector, attractive spread and lower non performing
The major players in Indian housing finance industry are the Housing Finance
Companies (“HFCs”), Scheduled Commercial Banks, and Co-operative Banks.
The total incremental disbursements of the HFCs and the Banks have
increased from approx Rs 16,000 cr in 1998-99 to approx. Rs 39,000 cr in