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Strong Prospect ahead for Housing Finance Companies
Housing finance companies have a bright future with strong increase in demand for housing loans and stable real estate prices. Despite the fact that the stocks are not economical, they make good long-term investments.
The US Federal Reserve has slashed rates by 100 basis points in the past three months because of last week’s 25 basis point cut in the interest rate. The cut signifies benign interest rate environment worldwide once again as the US grapples to perk up its drooping economy and prevent the worsening credit crisis. According to industry sources India will also follow the trend of lowering interest rates over the next few months
Real estate prices which have almost doubled in the past 3 years seem to be stabilising now. Anuj Puri, chairman, Jones Lang Lasalle said that they expect prices to hold at current levels.
The demand for housing loans are bound to go up because of falling interest rate and stable prices,. While banks are slowing down their retail loan exposure which mainly comprise home loans, housing finance companies should benefit more.
Moreover, they are optimistic about maintaining or improving the key fundamental indicators such as net interest margins (NIMs) and non-performing assets (NPAs) due to improving incomes and strong recovery mechanisms.
Most housing finance companies have zipped past the Sensex and even the top two banks in housing loans namely ICICI Bank and SBI. Market experts believe that fresh investments should be considered on declines or at the current levels with a one year investment horizon.
News Published Under: Banking and Finance, Real Estate India | No Comments »