Would you rather fight one horse-sized duck or 100 duck-sized horses?
I have no inside information, but I presume this question has gnawed away at LIC Housing Finance (LIC Housing) for a while now. After all, the 33-year-old mortgage lender has an unenviable position among the 102 housing finance companies (HFCs) that dot India.
On one side there is a host of regional HFCs with under-Rs 15 lakh loans, which account for about 20% of the market. And on the other is Housing Finance Development Corporation, the horse-sized duck more popularly known as HDFC. In terms of size, LIC Housing’s loan book is less than half HDFC’s, making it the clear No.2 swinging widely in every which direction in the fight for the $296 billion Indian mortgage market.
But the dynamics of the fight changed drastically in April when HDFC tied the corporate knot with HDFC Bank in a $60 billion merger. And overnight LIC Housing became the horse-sized duck, sitting atop the food chain. Or did it?
You see, this isn’t a two-way fight, but a triple threat. In the third corner are lenders that are backed by a bank. The likes of State Bank of India (SBI), ICICI Bank, Axis Bank and now, the newly-wedded HDFC. These elephants have a distinct advantage in the fight, evident by the fact that banks control 68% of the mortgage market.
And “elephants can dance as well,” HDFC Bank’s CEO said when the merger was announced. But the dance is possible for HDFC only because it will now be part of a bank, says Seetha in his story today. A dance in which LIC Housing has no partners. A gunfight to which LIC is bringing a rusty sword.
What is this rusty sword and does LIC have a chance to restore its gleam? The layout of India’s mortgage market told through the lens of its new “market leader.”
