HDFC Q3 update: Recovery on cards ?

In its business update for the quarter ended December 2020, HDFC Ltd, India’s largest housing finance company reported some strong numbers.

• Strong loan growth: The individual loan business continued to see improvements during the quarter ended December 31, 2020. Disbursement growth over the corresponding quarter of the previous year was 26%. For the nine months ended December 31, 2020, individual loan disbursements stood at 86% of the levels in the corresponding period of the previous year.

• Real estate sector: During the past few months home sales have shot up and the general sentiment in the real estate sector has been positive. Thus this has supported HDFC’s recovery in the latest quarter. We recently notified our users on the recovery seen in the Real Estate sector. Check our report here. 
• Positioning: Being the leader, HDFC has a cost advantage while raising funds, moreover, the lender has strong provisioning buffers. As of September end, HDFC had ₹1,200 crore of COVID related provisions.

HDFC’s recent update gives a positive outlook for the housing sector finance as a whole. Specifically, large companies with good asset quality should report good Q3 numbers. However, the bigger question remains on the sustainability of the growth. Various factors like the Festive season demand, pent up demand and historically low home loan rates were major drivers of growth. A long term recovery can only be assessed after the next few quarters.