scorecardIndia’s largest home loan provider HDFC has given real estate stocks another reason to rally
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India’s largest home loan provider HDFC has given real estate stocks another reason to rally

India’s largest home loan provider HDFC has given real estate stocks another reason to rally
Stock Market4 min read
  • Housing Development Finance Corporation’s individual loan disbursements rose rapidly by 181% on year in June quarter.
  • The leading housing finance company sees strong demand for home loans since many locations have unlocked post covid.
  • Real estate company stocks have been gaining since the last 30 days hoping for a recovery.
The largest private housing finance company in India said that demand had improved in both the affordable segment as well as in high-end properties.

While the company’s net profit declined marginally to ₹ 5,310 crore from ₹5,669 crore same time last year, Housing Development Finance Corporation (HDFC) saw a 181% growth in individual loan disbursement in June quarter 2021.

"HDFC surprised the street with almost steady asset quality performance during a quarter when most peers in housing as well as other asset finance sectors have reported a significant rise in stressed loans," said Kotak Institutional Equities in its report dated August 3.
HDFC net profit revenue

Home loan disbursement refers to the release of the credit amount by the bank or financial institution to the borrower. “While disbursements during April and May of the current financial year were somewhat impacted, business has reverted to normalised trends in the months of June and July,” said the company while announcing its June quarter results.

This is a trend that has continued for the last few quarters with exceptions in the month of April and May 2021 when the second wave of the pandemic struck.

Watch the company’s Chief Executive Officer Keki Mistry expressing similar optimism in a conversation with Business Insider in February this year.

This has helped real estate stocks sustain the rally seen over the last one month.

Top five realty stocksGains on Aug 2Last 30 days
Oberoi Realty9%16%
Godrej Properties2%17%
Indiabulls Real Estate3%33%
Prestige Estates Projects7%26%

India’s real estate sector has been in a limbo for a few years now. The pandemic made it worse and, despite steady cuts in benchmark interest rates by the Reserve Bank of India (RBI), the recovery has been slow, to put it mildly.

According to latest data from property consultants at Anarock, over 1.74 lakh under-construction homes ⁠— estimated to be worth over ₹1.4 lakh crore (about $20 billion) are stuck across the top seven cities in India. These projects were launched before 2014 but have not been completed since.

The total number of properties under construction in India exceeds 626,000. Even HDFC’s earnings statement noted that people preferred ready-to-move properties compared to those under construction.

Many of those who have taken home loans are also struggling to repay. Individual non performing assets (NPAs) increased due to slippages after the impact of the second wave of the pandemic.

HDFC chart 2

However, the outlook for real estate stocks has been so bad that investors are craving for any amount of optimism. And, some of it has been available for those seeking it.

Macrotech Developers, the owner of the Lodha brand of properties ⁠— one of the biggest developers in India ⁠— clocked a total sales booking of ₹957 crore in June quarter, of which ₹654 crore came in June.

Macrotech developers chart

"We expect the sector to outperform in coming years wherein companies like DLF, Oberoi Realty, Godrej Properties, Phoenix Mills, Brigade enterprises, Indiabulls Real Estate and Sobha, which collectively contribute 87% of Nifty Realty Index, are poised to generate above-average returns in years to come and should be considered as long-term investment bets in portfolios," broking firm ICICIdirect recently said.