Spurred by the recent NBFC (Non-Banking Financial Company) crisis in India, which has brought the funding and low equity capitalisation issues in focus especially of the housing finance company (HFC) sector, banks have regained lost market share from the HFCs, with SBI emerging as the favourite in the housing finance space.

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The market share of HFCs has fallen to about 43.6% as of December 2018 vs 46.2% as of March 2018, according to a report by Emkay. Meanwhile, many PSU Banks including major lender State Bank of India (SBI) has witnessed a surge in market shares as they have been fairly active in securitization markets in Q3FY19, the report quoted.

With robust portfolio growth of about 21.7% year-to-date (26.5% y-o-y), SBI has remained the undisputed king in the housing finance space with an overall market share of about 22.1% as of December 2018 vs 20.5% as of March 2018.

Amid NBFCs, HDFC, the previous market leader, is seeking to defend its position by managing a market share of about 15.7% as of December 2018 vs 16.8% as of March 2018. LIC Housing Finance, Indiabulls Housing, and DHFL witnessed declining market share trends, whereas PNB Housing remained the only exception with a market share gain to 3% in December 2018 vs 2.7% during March 2018.

"The trend is likely to remain favorable for banks even during Q4FY19. However, with some ease in liquidity conditions, HFCs may gain their lost ground," the report added.

The overall mortgage portfolios of large banks (Private/PSBs) and Housing Finance Companies (HFCs) have also seen healthy growth of about 18.3% y-o-y and 12.7% (April – December 2018). Banks were the leader of the pack, clocking about 18.3% growth vs HFCs’ growth of about 6.3%. The mortgage market share of banks also improved to about 56.4% as on December 2018.

"For all large HFCs, the overall borrowing profile has improved toward longer-tenure maturities against skewed toward shorter maturities earlier. However, we expect the rebalancing of maturity profile to continue even during the current quarter, which will keep margins under pressure," the report said

The brokerage preferred promoter backed, well-governed NBFCs/HFCs with stable liability franchise and the ability to raise money comfortably. Bajaj Finance remains their top pick in the sector, followed by HDFC, Cholamandalam Finance, and Mahindra Finance.