India’s PNB Housing Finance posted a 24% rise in second-quarter profit on Monday, on the back of strong demand for loans in the affordable housing category.
The non-banking finance company’s consolidated net profit rose to 5.82 billion rupees ($66 million) in the three months ended September 30 from 4.70 billion rupees a year earlier.
PNB Housing’s affordable housing segment, which offers higher interest margins due to limited competition from large banks, has been expanded aggressively, with average loan size of 1.5 million rupees.
Loan demand in this segment rose in the last few quarters with the help of the government’s push for low-cost housing, including subsidising home loans for first-time buyers from lower- and middle-income families.
India’s recent tax cuts are also expected to stimulate home loan demand, with lower costs across the construction sector enhancing affordability.
The company said its loan assets in the affordable housing segment more than doubled to 65.31 billion rupees from a year ago, as of September 30.
Disbursements in this segment rose 31% to 8.23 billion rupees, while that for the prime segment rose 2% to 30.50 billion rupees.
PNB Housing’s total loan disbursements rose 12%, pressured by lower growth in prime segment.
The premium housing segment has been seeing stiff competition, with banks offering home loans at lower rates than NBFCs.
Unable to match the pricing without hurting returns, several large finance companies are pulling back on such business, analysts said.
Net interest income, the difference between interest earned and paid, rose 14.4% to 7.65 billion rupees, while overall revenue climbed 13% to 21.28 billion rupees.
Its asset quality improved, with gross bad loans as a percentage of total loans falling to 1.04% at the end of September from 1.24% a year ago and 1.06% in the previous quarter.
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