Jan 21 (Reuters) – An Indian housing finance lender posted a 7.7% rise in third-quarter profit on Wednesday, supported by healthy loan growth in smaller cities amid intensifying competition in the mortgage lending space. The non-banking finance company (NBFC) reported consolidated net profit after tax of 5.20 billion rupees ($56.8 million) for the quarter ended December 31, compared with 4.83 billion rupees a year earlier. Total revenue increased 9% to 21.19 billion rupees. The lender has expanded aggressively into the non-premium and affordable lending space in recent quarters, where loans typically command higher interest rates due to lower competition from big banks. However, that advantage may be eroding, as analysts said competition in the affordable segment from larger lenders is picking up. Meanwhile, the prime segment, which generally includes loans in larger cities, continued to face stiff competition. Disbursements in the emerging markets segment, which caters to smaller cities with an average loan ticket size of around 2.5 million rupees, rose 25% year-on-year to 21.49 billion rupees, while the prime segment grew 20%. However, disbursements in the affordable loans segment, which caters to borrowers with monthly household incomes as low as 10,000 rupees, fell 15%, with overall disbursements rising 16%. The company said the decline in the affordable segment was due to ticket size capping in select geographies. Net interest income, the difference between interest earned and paid, rose 11% to 7.72 billion rupees. Asset quality also improved, with gross bad loans as a percentage of total loans declining to 1.04% at the end of December from 1.21% a year earlier.

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