The Indian banking sector may be staring at big challenges currently due to the NPA issues, but is at the cusp of huge growth in the next few years. There are very few sectors which can boast of a 15% yearly growth, and in many ways, this was where the Indian Information Technology sector was 20 years ago. Looking at the huge investment opportunity in the banking industry, the latter is going to play an important role for the country to achieve the $5 trillion GDP target. There is no doubt that there are very few businesses globally where one can confidently speak about a 15% yearly growth over the last decade, but the banking sector is one such sector which can contribute to the target. Analysts have acknowledged that there will be challenges in the process, but exuded heavy confidence in the Indian banking sector meeting these targets in a safe manner. The banking sector has been working silently and doing its job diligently until now by taking the banking services to the grassroots and connecting a billion people. Similarly, like the banking industry, the development of the housing sector has a direct impact on employment generation, GDP growth and consumption pattern in any economy around the world. With the increasing level of income, the demand for housing is increasing at a rapid pace by prospective individuals. The housing finance market in the country is controlled by the government, where it is the facilitator and assisted by two regulators, the Reserve Bank of India and the National Housing Bank. The Indian housing finance market is dominated by commercial banks, cooperative banks and housing finance companies, self-help groups, micro-finance institutions, and NGOs. The RBI regulates commercial banks, while the National Housing Bank regulates the housing finance companies. The largest contributor to housing loans by virtue of their strong branch network and customer base are scheduled commercial banks accounting for a major share of the housing loan portfolio in the market followed by housing finance companies. Housing finance companies are likely to grow at around 12-14% in the next financial year 2020-21, while non-banking finance companies are likely to grow at around 16-18%. For a portfolio growth of 15%, housing finance companies need incremental funding of around Rs 2 lakh crore in the next the fiscal year. The year 2019 also marked a significant rise in consolidation across geographies and the demand for affordable housing has saved the day for realty developers. Mid-income housing has clearly been the frontrunner in driving the housing growth this year on the back of the government’s reformatory push and participation of private players leading to increased demand. LIC Housing Finance Ltd is a blue chip housing finance company fancied strongly by foreign investors and domestic mutual funds. Analysts tracking the company strongly feel that the stock currently trading at Rs 440 can be accumulated for a 25% price appreciation in the next one year.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.

 

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