star housing finance ltd share price Management discussions


For the pastthreeyearsthe entire world has been grapplingtoreducethe impact of Covid-l9 pandemic. The slowdown in the impact of the pandemic, vaccination drives, supportive macroeconomic poiioes and favorable financial conditions all over the globe proved to be catalystforglobal resumption of work and the economy. The globaleconomy was on the verge of recovery postsevere two years of the Covid 19 pandemic yet across countries, there remained divergence in place of recovery, largely differentiated by the extent of vaccine access

It is a big relief to see world economy getting back on growth. India started seeing economic revival in 03FY21 and FY22 is certainly a turnaround year. Countries have adapted to Covid and consequently economies have opened up. This is due to higher ir>ocutation of populations with vaccines. Environment is reasonably positive. According to IMPs World Economic Outlook (Apr22), the world eo>nomy is projected to grow by 3.6%each in 2022 and 2023 fromagrowth of 6.1%in 2021 and normali2eintherangeof3,3%-3.4%over themediumterm.

India is the third largest ecorromy on PPP basis as per World Bankand is projected to fare better than peers with an impressive estimated growth of 8.2% in 2022 and 6.9% in 2023. As per various leading research institutions, Indian economy has the potential to deliver the highest GDP CAGR globally in the medium term amongst large ecorvomies, driven by various staictural policy measures taken by the Indian government.

In mid of the year inflation started to rise across most countries the central banks initially deemed rising inflation as transitory, largely attributing it to temporary supply chain dtsruptior^. Global markets remained awash wtth liquidity, inflating most asset classes. The central banks continued with their accommodative mor>etary policy stance in order to support growth. In addition, governments and financial regulators provided a sle\v of measures to alleviate the impact of the pandemic and cushion the shock to various sectors of the economy.

However, the world facedanew challenge by thestart of2022in the form of war betwecnUkrairie&Russiaand saw increased volatilltyin global markets owing to an outbreak of the Omicron variant, economic slowdown in China, faster than anticipated pace of monetary tightening across advanced economies and the eruption of geopolitical tensions.

Key coTKerns for now shift from pandemic to Russia-Ukraine war arvd resultant disruption to the global supply chain as well as higher crude prices. The RBI along with other central banks of major economies has reacted to thisand has increased the benchmark Repo rate. In-fact RBI has been relatively more pro-act/ve In attending to contain inflationary pressures, ft remains to be seen how the higher interest rate regime pans out globally and sp>ecificaily for India and how domestic demand story on the backdrop of recovery from pandemicimpactsthe growth.


In First quarter of financial year 2021-22, owing to a second wave of COVID-19 severe consequences such as spiralling infectiorvs, shortages of essential medicals up>pliesandanincredseddeathtollrtwasentaileddhigherlo$$oftives.

Towards the end of June 2021, there was an ebbing of the second wave. This coupled with the easing of pandemic related restrictions, increased vaccination coverage, strong agriculture growth supporting rural demarvj and the unleashing of pent up urban demand aug ured well for the I ndian economy

After that the Indian economy is on the recovery path despite global headwinds. The country experieixred third vvave of pandemic owing to the Omicron virus starting from December,2021 but it was less severe as compared to earlier two waves and this indicates that we are entering theendemicstage. Thepossibilitiesoffourth wave hitting India remains low due to improved immunityand high vaccine coverage.

Throughout the year, the RBI accorded priority to growth and retained an accommodative monetary policy stance. The RBI managed liquidity in the system through a combination of the Government Securities Acquisition Programme, open market operatiorw, OperationTwist,seU/buy swaps and long duration variableratereverser^>o operations

As per the second advance estimate by the National Statistical Organisation (NSO), the irdian economy is expected to grow 8.9% in FY22 compared to a contraction of 6.6% in FY21. Most high frequency indicators exhibited good recovery, surpassing pre-pandemic levels Indias tax collections in FY22 stood at an all-time high of Rs.27.07lac crore, reflectir>g better tax compliance and better revenues

indirectand indirect taxes.

In March 2022. Indias retail inflatitwn spiked to 6.95%, which marked the third consecutive month of inflation being above ttie RBIs tolerance threshold of 6%. Core inflation, whidi excludes food and oil prices, was also above 6%. Higher inflationary expectations resulted in bond yields rrvoving upwards. RBI has till now increased Repo rate twice in successive meetings and has given its outlook for year as conservative anddirccted towards containing inflation.


During the year, various state government^local authorities anr>ounced lockdowns/ restrictiorts of varying degrees. During the waves of infections, some offices of the Corporation were closed or \w&re working on revised timirvgs in accordance with extant guidelines. Businesswaslessdisrupteda scustomerscontinuedtobeservedthroughthe online platforms.

As per various surveys, reverse migration has further supported an increase in housing demand in tierll/lll cities. This is validated by the strong recovery seen in Real Estate sector in FY2Z Also, as per experts, the demand dynamics of the Indian real estate haveundergone a change during pandemic. Buyers are demar>ding homes which offer more liveable space. The residential property now doubles up as an office corner, virtual workouts as well asa place for onlirte schooling.


The National Housing Bank (NHB) was set up as a principal agency for the promotion of housing finance institutions both at local and regional levels and to provide financial and other support to such institutions. To ensure a consistent regulatory regime, the Finance (No.2) Act 2019 amer>ded the National Housing Bank Act 1987, conferring powers for regulation of Housing Finance Companies (HFCs) with Reserve Bankof India (RBI). Earlier RBI had issued draft and then final regulatory framework for HFCs which treated HFCs asa specia Used type of N BFC.

The RBI announced Master Directions for HFCson 17 February 2021 in order to protect public interest, ensure better functioning of the financial system and HFCs, and preventaffairs of companies being conducted in a manner that isdeemed detrimental to investors and depositors interest. The current Master Direction provide comprehensive regulatory framework to HFCs for a sound and sustainability dovolopmont of housing finance in thecountry.


The housing market continued to witness a trend of increased number of first-time home buyers and those moving up the property ladder by opting for larger homes or acquiring homes in another location. The need for housing was also triggered by a larger number of people working from home. The residential realestate market continued tosee strong growth in housing sales and new launches. Overall inventory levels have decreased. Factors such as low interest rates, rising income levels, stable property p>rices, improved affordability and continued support of fiscal incentives for htxneloansaresome of thereasons for strong demandfor home loans

Indias real estate sector, which isa $200 Bn market currently, has come out of thedisnjptions caused by the Covid and is on the path to become a $1 Tn industry by2030. With growing urbanisation, nuclearization, increasing working population coupled with increasing per capita income, demand for housing willsce a rise. As per a report by Knight Frank, there will be a housing gap forabout 97 mn households by2030.upfrom70mn households in 2019. These numbersarevery close to that in the RBI document published in2019.

The Indian housing finance market grew at ~16% CAGR over FY15-21 owing to rise in disposable income, healthy demand, government impetus on housing and more market players catering to different segments. It is estimated to grow In the range of 8-10% CAGR. HFCs accounted for 41% share of the total home loan outstanding amount as of 5ep21. The growth of HFCs is faster on account of deepier reach, focused approach, andexpertise in this segment

As per credit bureau, the overall affordable housing outstanding credit growth grew at a CAGR of -10% durir>g FY15-21. The major growth drivers being increase in penetration of financiers in rural and semiurban areas, favourable demographics, government push to promote "HousingforAir,and improvedaffordabilityofborrowersLThe affordable housing market outstanding is-Rs.9.2TnasonFY21 and as per various research, it is projected to grow by at least 9-10% CAGR in the medium term to touch -Rs. 22 Tn by FY30. In volume terms, affordable housing loans comprises majority of overall housing loan volume.


The Union Budget 2022 - 2023, presented on February1,2022, remains committed to affordable housing. The budget underscores the governments focuson‘Housing For AT. Pointingoutthe needfor efficient use of land resources, Rnance Minister NirmalaSttharaman urged all the States to adopt a Unique Land Par<^ Identification Number (ULPIN) for IT-based record management to facilitate digitized management of records.

AFFORDABLE HOUSING: The Union Budget2022 -2023announced the allocation of Rs.48,000crores for the Pradhan Mantri Awas Yojana (PMAY). which is 75% higher than the Rs. 27500 crore budget allocation made in the previous financial year. Around 80 lakh homos are expected to bo completed by 2023. This announcement is expected to boost affordable housir>g and act as an incentive to thedeveloperswhoare building affordable homes

DIOmZATION OF LAND RECORDS: The Ur^ique Land Parcel Identification Number (ULPIN) of a land parcel is similar to the Aadhaar number of an individual. The ULPIN has been launched under the Digital India Land Records Modernization Program (DILRMP). The Center has focused on the digitization of land records through its DILRMP scheme. According to the Department of Larvd Records, over 90% of the land records have been digiti zed in over 24 states.

NATIONAL GENERIC DOCUMENT REGISTRATION SYSTEM (NGDRS): Under the broad aegis of the DILRMP scheme, the National Generic Document RegistraticK^ System (NGDRS) was introduced to provide a ‘One Naton One Registration software. A total number of 12 States/Union Territories have adopted the NGDRS so far, covering a population of more than 22 crores. More emphasis has been given to the integration of the Registry Office with other offices where some information is required for the completion of rogistrationdcods. Information for mutation isautomaticallysenttothe concerned departmontaftertherogistration of deeds

UNIQUE LAND PARCEL IDENTIFICATION NUMBER (ULPIN): The ULPIN has also been launched under the DILRMP scheme. The ULPIN is a unique 14-digit ID for every plot of land in the country based on the georeferencing coordinate of vertices of the land parcel. Thistechnologyisof international standard and complies with the Electronic Commerce Code Management Association standard and Open Geospatial Consortium standards It ensures compatibility so all the states can adopt it The ULPIN is expected to identify the government land records easily and protect them from fraudulent transactions. It will also ensure the efficient sharing of land records data beti/i/een departments.


The Union Budget 2022 - 23 has proposed that 1% TDS (Tax Deducted at Source) will apply to the sale of immovable properties of over Rs 50 lakhs based on the sale price or the stamp duty value, whichever Is higher, after an amendment in the Income TaxAct.Thisamendment aims to bring parity behveen drfferentsectlonsof thelncomeTaxActand also ensure thereis no tax leakage atthetime of property transactions.


The master directions issued by the RBI on 17 February 2021 are expected to bring in greater discipline by way of detailed regulatory requirementswhichwill bring about more transparencyandcompliancein the housing finance sector.

The central banks mandate regarding a liquidity buffer with respect to liquidity coverage ratio (LCR) is expected to enhance MFCs resilience to potential disruptionsto liquidity. This willbe on account of HFCsmaintaining sufficient high-quality liquid assets to mitigate any acute liquidity stress scenarios lasting 30 days.

The RBI also directed MFCs to maintain full cover available for public deposits at alt times If an HFC fails to repay public deposit. It shall not grantany loan oranothercreditfacility or makeany investment or createany other asset as long as the default exists

The RBIs master directions on MFCs detailed the purview of housing finance to include financir>g for purchase/ corvstaiction/ reconstructioiVrepairs and renovation of housing dsveiling units V/ith this, the RBI brought companies engaged in construction finance also under the ambit of these directions therety increasing the scope of its supervision and enhancing the transparency across the construction value chain.

The regulations pertainirvg toHFCs were with the extantNBFC regulations. The RBI maintained the flexibility of the MFCs with respect to risk weights linked to LTV in respect of housing loan to individual, as NBFCs generally have lesser flexibility for risk weights, which are broadly classified into 0%, 20% and 100%. As the flexibility has been continued, the MFCs would not require additional capital to service the same Loan Bookand can maintain the current levels,subject of course tominimum capital requirements.

As the larger HFCs already meet the above guidelines, they are unlikely to face significant challenges when HFC regulations are further harmonised with NBFCs going forward.


The non-banking housir>g finance market in India is fragmented with over 80 HFCs. However, foe top four players command over 70 percent of the market share.Thetop two playefsHDFC and Lie each haveassets over Rs.lTrillion and command over 60 percent of the overall market as of March 21. As MFCs were not able to accepted deposits from consumers in normal circumstances earlier, they have less stringent regulations vis-a-vis banks.

TheHFCsgainedprominencewhentheretailhousing segmentwas neglected by banks, with many small consumers unaWetofulfillthe strir>gont documentation requirements of banks. Although the interest rates charged were higher than that of banks (duo to a higher cost of funding), but this did not deter small consumers to pursue the same In terms of a clear lack of alternatives. Thus. In the last few years, there has been a large influx of ne\v players, taking the number of non- deposit-taWng MFCs from 56 <FY 20M) to currently more than 80 accordingtothe National Housing Bank.

HFC scanincorporatestampdutiesartdregistiationcostsinto the home values (of value lesstftanRs.lOlakh) to allow a little higher loan in the affordable segment Through In all other loans (above Rs. 10 lakh) inclusion of Govt levy or revenue charges In the value of property for LTV purpose are not permitted to maintain the parity in the industry. Further, with banks having switched to marginal-cost- based lending rates (changing from base rate regime) in 2016, the interest rates may creep higher with funding costs, ther^y reducing thegapinratesofferedbybanksandHFC&Despitebankslarger scaleand funding advantages, they have been losing out to the HFCs.


The housing credit growth is expected to be in the range of 6%-11% in FY2022 lower than the previous years. The growth is expected to beslowerinHl FY2022 while recovery in H2FY2022would depend on the overall economic turnaround.

The growth is susceptible to risks of deferment in their home purchases and home ImprovemenVextension decisiorts till there is a full- fledged resumption in business activities.

However, demand for housing loans has already picked up during the last two-quarters of Fy2021, most of the HFCs have already reached near pre-Covid level disbursements to achieve furtherhigherdisbursement&Consequently, HFCs are likely to witnessupward growth in FY.2022.

As for the HFCs in Affordable housing space, which largely caters to self-employed and middle-to-low-income borrowers, the impact of the Covid-19 pandemic on eamir>gs and savings could lead to the delay of homo purchases for some time by such borrowers. Thus, their portfolio growth Is expected to be moderate In FY.2022, but it Is expected to continue growing at a faster pace than the overall industry.

HFCs are expected to maintain healthy liquidity in the short term as most of them are gradually reducing their reliance on short-term funding sources like commercial papers, which has helped improve asset-liability mismatches. Moreover, healthy piovosion cover maintained ty most of the entities is expected to provide cushion and protect the profitability from COVID-related asset quality stress inFY.202Z

The busir>cssgrowth and all key performance parameters (asset quality, solvervcy, liquidity, earnings) are expected to witness recovery in the latter part of the next fiscal and would depend on the overall economic turnaround- HFCs abrlity to maintain the growth momentum and keep slippages under control would be critically monitorable. Over a long-term period of greater than Syears, there are positive signs which will help togrowthesectoras the IndianGDP increases arvj achieves the target set by Prime Minister Narendra Modi of US$5 trillionand as household incomesincrease with theincrease in GDP

The housing finance sector is expected to grow sustainably on account of sustained population growth, rapid growth coming out of non-metro India, increased per capita incomes, home ownership preference, affordable home prices along with a need for external financing, cor^sistent government support and extensive under-penetration.


Star Housing Finance Limited, asalender, is active In providing housing finance assistance to theEWS/LIG segment customers wishing to purchase/ construct own homesinTier II, III towns,semi-urban and rural geographies.

The operational geographies of Star HFL has remained intact and has withstood the test of disruption due to Covid-19 pandemic. The demand has remained robust and has been further bolstered by virtue of reverse migration of population in these geographies from urban sectors.

The space in which Star HFU operates has traditionally outpaced the overall mortgage market grovvth. Star HFL, as a company, is well poised to exhibit growth in future if its focus remains in this particular segment. Despite government level interventions, there is a latent demand in this space at any point of time thefeby creating a need for a financier to cater to them on fair termsw Star HFL stands to gain from such dynamics and can look forward to making a substantial contribution to boostir>g housing stock in India as well as enhancing overall growth supported by quality.


Statements made in the Management DiscussionSc Analysis describing the Companysobjectives, projections, estimates, expectations may be "Forward-looking statements" within the meaning of applicable laws & regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operatior?s include economic conditions affecting demand supply and price conditions in the domestic & overseas markets in which the Company operates, changes in the government regulations, tax laws&other statutesand other incidental factors.