PE players flock to HFC space on higher growth potential
Private equity (PE) players like Warburg Pincus, TPG, Bain Capital, among others are showing higher interest in India’s fast growing housing finance companies (HFC) space, experts say.
“We are definitely seeing a lot of active participation by private equity players in the space. It wasn’t the case earlier in HFCs. A lot of private equity players are showing interest in HFCs and affordable housing. There is huge potential, and this sector didn’t attract much interest earlier, but now the dynamics of the industry might change,” said Monu Ratra, ED and CEO, IIFL Home Finance.
String of transactions
On December 11 last year, Warburg Pincus completed the acquisition of entire stake of Shriram Finance—84.44 per cent–in its housing finance subsidiary Shriram Housing Finance for ₹3,929 crore.
Mortgage Finance AUM growth
In 2024, Multiples PE-backed Vastu HFC reportedly raised $100 million from Dutch technology investor Prosus; mortgage-tech start-up Easy Home Finance also reportedly secured $35 million in its latest Series B funding round, led by Claypond Capital and Sumitomo Mitsui Banking Corporation’s Asia Rising Fund; and Vridhi Home Finance reportedly raised around $37 million in a Series B funding round led by Norwest Venture Partners.
In 2023, TPG Global affiliated Perseus SG Pte picked majority stake in Poonawala Housing Finance for ₹3,004 crore and rebranded the HFC to Grihum Housing Finance, while Adani Group exited the NBFC space in the same year, selling its 90 per cent stake in Adani Capital and Adani Housing to Bain Capital.
What’s driving investor appetite?
According to Manish Jaiswal, Grihum Housing Finance MD & CEO, India’s housing finance industry is around ₹32-33 lakh crore in size and will likely grow to ₹50 lakh crore in the next 4-5 years time.
“In terms of demand, growth, I see that people who have found out their niches, focus, locus, and their business model, they play pure to it. There’s enough opportunity for people to kind of hold on to a long-term stability,” he said, adding that government run Pradhan Mantri Awas Yojana has also aided the housing sector.
Per CRISIL, the assets under management (AUM) of mortgage finance loans extended by NBFCs and HFCs is expected to grow at a healthy 16-17 per cent in this fiscal and the next, compared with 18 per cent last fiscal.
“Over the current and next fiscals, home loans should grow at a reasonable pace of 13-14 per cent which will be a slight dip from last fiscal, while LAP growth is expected to normalise to 23-24 per cent from the fiscal 2024 high of 37 per cent,” the rating agency said.
Home loans growth is supported by structural factors such as rising urbanisation, better affordability on account of limited housing price increases in recent years, and expected cut in interest rates.