The housing finance industry remains in a sweet spot, with several key drivers such as favourable demographics (a young population; median age of 26 years), large unmet housing demand, low urbanization, low mortgage penetration versus global peers, and improving affordability. Moreover, with falling inflation and wage inflation staying steady, affordability will only go up in the next couple of years.

The government's particular focus on housing-for-all should sustain the housing sector for the next decade. Its thrust on affordable housing, enhanced tax incentives on home loans and lower risk weights for affordable housing loans up to INR3m bode well the housing finance industry. As per the Planning Commission, formal mortgage financing penetration
Its loan portfolio grew at a CAGR of 61.76% (3.3x the industry growth) from INR39b in FY12 to INR271.7b in FY16. It also has the second-largest public deposit base among HFCs after HDFC.

The growth story of PNB Housing Finance has been in the lime light for a certain period of time and it was able to do so in a short span of four years, which were due to a number of factors. The case study discusses the various factors led to the growth of PNBHF and the challenges faced by the real state sector after demonetisation, since most of the deals in this sector happen through
CAGR is not an accounting term, but it is often used to describe some element of the business, for example revenue, units delivered, registered users, etc. CAGR dampens the effect of volatility of periodic returns that can render arithmetic means irrelevant. It is particularly useful to compare growth rates from various data sets of common domain such as revenue growth of companies in the same industry. Hence the higher the CAGR over the years the better the performance of the company.

FY12-16 loan book CAGR – best among peers

From the above the graph it can be clearly understood that in the period stated above PNB Housing Finance is the company which has the highest CAGR among the peers of the Finance company.
The company still has a long way to go in terms of efficiency improvement. Cost-to income ratio (calculated) is elevated at 30%, and remains higher than most peers.

Growth in operating expenses has been driven primarily by growth in ‘other opex’ as compared to growth in employee expenses. Main drivers of ‘other opex’ growth have been advertising and loan acquisition