Scaling up retail housing

Interest rates are low. But the uptick on home loans is not visible. What trends are you witnessing?

Home loans are growing around 15 to 17 per cent and hence it would not be entirely correct to say that uptick on home loans is not visible. The sector has seen two major reforms— RERA and GST. With RERA kicking in from 1st May 2017, builders are busy implementing their ongoing projects to the RERA regime. New launches have to be registered under RERA before any marketing activity by developers. Hence, in many parts of the country we could see a dip in launch of new projects. Second factor is the implementation of GST and clarity on the rate applicable to under construction units.

Perhaps there were expectations of cost rationalisation for new units post GST which put prospective buyers in wait and watch mode. It is natural that new changes will bring its own challenges. Things are settling down fast as we see the number of projects getting registered under RERA. Confidence is slowly coming back. Typically, good deal of purchases, including homes for Indians, start from the festival season which has just commenced.

The government is continuing its drive on affordable housing and supports the first time buyers with credit linked subsidy scheme. The Employee Provident Fund (EPF) now can be withdrawn for purposes of down payment and EMIs of home loans. Interest rates are attractive. These are the positives needed to lift the sentiments of people. In my opinion, all of these vibes augur well for the end user segment and we can find sustained growth in the industry for the next few years.

With the festive season round the corner, do you see an update in home loans?

We have witnessed spurt in home buying activity as soon as the festive season commences. As I said, festive season is considered auspicious for any purchase. Sales promotion activities by developers are back with exciting offers like Zero GST, OC (occupancy certificate) obtained, ready to move in, etc. The home loan market goes hand in hand. For lenders like us, the busy season has started. To induce positive sentiments, banks have started waiving processing fees and other concessions; we see home loan campaigns in all sorts of media enhancing the momentum of home purchases with easy loan options. Overall, the acceleration has started and we are optimistic about the future prospects.

How is PMAY panning out? Doesn’t the low threshold make it restrictive for a lot of potential borrowers?

PMAY is not restrictive. It covers a wide range of income groups like EWS, LIG, and MIG with income levels up to Rs 18 lakh per annum. Thus, the coverage is wide and targets the first time home buyers. The subsidy transmission is seamless and upfront resulting in reduced EMI and effective interest rates. This means a lot of savings over the loan tenor and more money in the hands of the borrower.

At LIC HFL, we have included to increase PMAY coverage in our core marketing strategy. We are continuously educating the borrowers about the benefits of the PMAY and how their effective rates of interest comes down with the subsidy as well the prevailing tax benefit on home loans. Builders too are increasing their focus in this area after affordable housing got infrastructure status. They are customising projects for this segment and everyone is upbeat about the scheme. Overall PMAY CLSS will pave the way for success for affordable housing.

What has been the impact of MCLR on existing loans? Are people shifting to this prime lending rate?

HFCs follow PLR (Prime lending rate model). At LIC HFL, we have LHPR (LIC Housing Prime Lending Rate) as the reference rate and all loans are pegged to this rate and would vary depending on market conditions. LHPR is reviewed quarterly and any reduction to LHPR automatically gets transmitted across the board and benefits our existing borrowers.

What has been the impact of digitisation on lending model?

Digitisation is in the core of our strategy encompassing customer relationship, internal processes and operational areas. On credit appraisal most of our checks on KYC, PAN verification and credit rating through CIBIL are digitised. This enables us to screen the cases at the preliminary stage itself. We have online approvals in place where on basis of inputs from the customer, a pre-approved loan offer is given.

So, digital platform helps in reducing TAT (turnaround time) in the approval stage. However, post sanction formalities like documentation requires customer interface owing to the technicalities involved. It is noteworthy that in many parts of the country registration of title deeds has been digitised. Also, property records like encumbrance certificates and mutation registers are available online. RERA is yet another boon for the industry. With all project details, specifications and sale position available online, comfort of lenders is going to increase manifold.

With more things shifting towards digitisation and integration, it is going to make processing of loans swifter and more cost effective process. LIC HFL has been transforming its businesses successfully with the push from digitalisation, over the past several years. Overall, there has been an increment in the customer engagement levels due to digitisation.

There is a visible uptick on consumer loans, what will trigger a similar uptick on home loans?

Owning a home today without external financial assistance is difficult. There is an increasing demand for real estate given the emergence of nuclear families, increase in per capita income, age demographics, emergence of smart cities to name a few. Naturally the demand for home loans will also increase. Housing finance is among the most active sectors within the country today.

The government’s thrust on providing ‘Housing for All by 2022’ and other initiatives such as PMAY CLSS scheme, tax benefits, infrastructure status to affordable housing will only act as fillip to the housing sector. RERA is another welcome change which will consolidate and regulate the sector which was marred by many opaque structures. Macroeconomic factors and policy led actions are conducive and should fuel the next phase of growth for the sector.

What are the plans for LICHFL in the second half of the financial year?

LIC HFL has always been adaptive and has aligned itself with the market needs. Through the right mix of portfolio on the asset side, we shall continue to show growth with profits and at the same time, maintain margins. Our zero tolerance policy for NPAs would continue and will remain the best in asset class in the industry. As I said earlier, we shall be giving thrust to PMAY CLSS initiative through our Apna Ghar loan scheme.

Plans are there to identify affordable housing projects for project funding. Our focus would be to scale up the retail housing loans which are the core business of the company. With two Regional Offices opened at Patna and Bhopal, we shall expand our reach and garner new business. Our plans are to increase number of distribution intermediaries by 50 per cent. Overall, we will continue to grow our loan book by 15 per cent during the year. 

Vinay Sah

MD & CEO

LIC Housing Finance

nk@outlookindia.com