When Finance Minister Arun Jaitley will present the Union Budget for next fiscal, real estate sector would like to see some relaxation in the service tax structure while registering the property, Sanjaya Gupta, MD, PNB Housing Finance Limited tells Financial Express online. He believes that it is an opportune time to buy a house for a prospective home owner. Excerpts from the interview:
Q. What was the idea behind raising another 2,000 crore in the near future to fund the affordable housing segment?
A. We are still awaiting RBI’s approval on raising $300 million through external commercial borrowings (ECB) . If that comes through, then only this initiative will see the light of the day. Meanwhile, since raising capital through ECB takes time, we have arranged $150 million line from ADB, draw down of which is subject to RBI’s approval.
Q. What is the future of affordable housing segment in India?
A. We would rather call it mass housing as it caters to mass affluent section of our society where housing is not a luxury but a necessity and where majority of our demography lies. For example, if we consider Delhi NCR, then properties ranging between Rs 65 to 80 lakhs will fall into this section.
In the current environment, we are seeing more business growth generating from Tier I cities while higher volumes are coming from the Tier II cities. This is mainly due to the difference in ticket size in both the tiers.
Q. PNB Housing didn’t focus much on Southern India? Why
A. On the contrary, I would say that we have been doing very well in South India and are prepared to tap the enormous opportunities available in this region. While undergoing a complete business process reengineering since the last 5 years, we honed our efforts to make South and West regions operationally robust and now they are giving rich dividends. We have outlined our expansion plans for these zones and have identified the locations where we want to strengthen our network.
We are currently operating with 9 branches in South India and very soon will inaugurate 3 more in the last quarter of FY15-16. These will be in Vijaywada, Vishakapatnam and Trichur. In first half of FY15-16, Southern zone has contributed Rs 5,310 crore, that translates to 24% of the total loan portfolio. In FY2014-15, the total loan book from South was Rs 4068 crore and total disbursement was Rs 2,351 crore.
Q. What is the rationale behind PNB Housing Finance’s Ltd sudden push to rebrand and reinvent itself in the Indian market?
A. We are a mid-sized housing finance company and in a short span of time we have become the 5th largest HFC by loan assets size and 2nd largest in terms of deposits book. We are present in almost all the major locations across the country and cover approximately 70% of the housing market with just 41 branches.
At PNB Housing, we are guided by the principle of well oiled internal operation robustness before we source any new business. In the last five years of re-invention, almost all the verticals of the company including business, customer service standards, technology, human resources and workflows were subjected to modifications and modernisation to turn it into a forward looking enterprise. After completing all the phases of transformation, the last leg was to communicate our promise of customer centric delivery model for the target audience.
The main objective of the campaign is to transform the brand perception in terms of service delivery model and re-position ourselves as a new age contemporary housing finance company. This is our first campaign and we would like to leave a lasting impression. While the campaign may have come as a surprise to the target audience, it had been planned far earlier as a part of our transformation journey.
Q. When the current government came into power, the manufacturing and real estate sectors were believed to be the biggest bets? Is it still the same?
A. The new government came to power with the agenda to fast track development in manufacturing and infrastructure. It was envisaged to be the core driving force of the Indian economy. We must note that these are the sectors that need good momentum to march forward. With a flurry of initiatives by the government, these two areas still remain the pillars of growth. While the outcome is delayed a little, it is certainly not out of sight.
Moreover, I don’t think there is anything wrong with the economy but the sentiment is low and the transaction velocity is slack. There is a shortage of 22 million houses in urban India and the initiative by the government on Housing for All by 2022 should provide the much needed velocity to the sector. The momentum will be higher in Tier II cities where the ticket size is smaller. Another important point is that with higher momentum in the real estate sector, we will see more employment being created. Primary reason for this is that construction industry is the single largest employer of migrant labourers in the country today.
Q. What are your expectations from the budget as far as real estate sector is concerned?
A. We want to see some relaxation in the service tax structure while registering the property. It is unjust to expect all relaxations from the developers or rate cuts from the lending institutions. Costs should be equally spread and some benefit should be passed to the end user from authorities as well. That would be one proposition that we would sincerely want to put across to the government.
Q. Do you think Smart cities project will give a boost to real estate sector?
A. There can be various meanings of smart cities and can be differently perceived by each individual. But in a generic sense, few core requirements of a smart city is quality infrastructure, secured environment, easy accessibility of amenities and better connectivity. Although governments and private players are putting in a lot of effort to upgrade infrastructure and offer better standards of living, a real game changer will be adaptability to the PPP model. With this, the processes will get streamlined and deliveries will also expedite.
Q. Will PNB Housing Finance will go public in future?
A. We are currently a mid-sized housing finance company with a business growth (CAGR) of over 50%. PNB Housing is expanding rapidly and we will require capital. The company is in the process of exploring various capital raising options to meet the business needs of the future but only the Board of Directors can take a decision on the final fund-raising route.
Q. Do you think real estate sector will see further correction?
A. The real estate sector is facing a slump at macro-level. However, there is nothing wrong in the housing sector. The prices are stable, the choices are wide. In fact, I believe it is an opportune time to buy a house for a prospective home owner.