INDIA BUSINESS WORLD - MAY 2006
THE MONTH THAT WAS...

ICICI EMERGES TOP MORTGAGE PLAYER

 IT'S BEEN a different kind of race unlike the cola wars or the FMCG duel between HLL and P&G as ICICI bank emerges as the dominant force in the Indian mortgage market. For FY06, ICICI bank has displaced incumbent HDFC and emerged as the biggest mortgage lender in the country with a total outstanding of Rs 45,400 crore against HDFC's total outstanding of Rs 44,990 crore.

Close to 67% of HDFC's total portfolio was in the form of loans to individuals while the rest comprise lending to corporate bodies and others. Housing loans have been amongst fastest growing categories within non-food credit growing at around 29% year-on-year. Non-food credit has been growing at close to 30% during FY06. For FY06, ICICI bank has also recorded higher disbursals at 40% compared to HDFC's 28% growth.

The Indian mortgage market in recent years has been witness to intense competition as banks have aggressively moved into the space given their focus on increasing their share of retail advances. Banks have been focussing on floating rate advances within mortgages as it lets them minimise the interest rate risk on the portfolio. HDFC has always maintained a top position in the mortgage market given its niche focus on the home loans segment. On an incremental basis though, ICICI bank had overtaken HDFC during FY05 and has since then held on to its leadership position. On an incremental basis, ICICI”s market share works to around 31% on total incremental industry volumes of Rs 82,500 crore for FY06. Says ICICI  bank deputy managing director Ms Chanda Kochhar: “That the home loan markets continues to witness strong growth as a function of the rising income and affordability levels in the country.”

ICICI Bank, over the past few years, has also been actively securtising a significant portion of its home loan portfolio compared to FY06. Lower securitisation of the mortgage portfolio also helped ICICI Bank boost volumes in FY06. Ms Kochhar maintains that mortgages would continue to be a focus area for the bank with ICICI looking at maintaining its leadership position in Mortgages.

Mortgages today comprise almost 50% of total retail advances portfolio for the system and are the single largest retail exposure for most banks. Bankers expect the strong growth in mortgages to continue, given the shortage of homes in the country. Housing shortage is estimated to be around 19.8 million homes, according to 2005 figures. Also the average age of the homebuyer is on the fall which is also helping in the strong growth of the market.