An interest rate cut will spur demand for home loans, Girish Kousgi, managing director and CEO, PNB Housing Finance, tells Anupreksha Jain. The focus is more on smaller cities than the metros as the housing finance company has exited super prime segments, Kousgi adds. Excerpts:
How will you end the fiscal in terms of margins?
Our net interest margin is expected to be stable at around 3.60-3.65%.
How are you reading the demand for home loans?
Demand has been very good this year and we expect this trend will continue and for demand to grow in the coming year too. There have been challenges such as the general and some state elections and a heat wave. In a couple of states, there are issues related to registrations. Due to these challenges, some lenders have not been able to make higher disbursements, but otherwise, the demand is quite robust and it will continue.
Among smaller cities, where is the demand strongest?
Demand is fairly uniform across the metro and other smaller cities. Demand for all four segments – super prime, prime, emerging and affordable – is quite robust. Currently, we are focusing largely on the affordable and emerging segments, and to a small extent on the prime segment as well. For us, metros are not a focus area because we have completely exited the super prime segment.
Do you feel expanding reach in tier-I cities is still a challenge as private developers are not keen on affordable housing projects?
The affordable housing market is driven only to the extent of 20% by developers, the rest is by non-developers. There is a supply constraint because developers don’t find affordable projects viable. They focus more on luxury and super-luxury projects. But from a business perspective, since 80% is non-developer, the demand is quite robust.
What are you expecting from the Union Budget?
The industry is expecting some rationalisation in goods and services tax rates. From the customer’s perspective, tax breaks on the principle and interest may become more attractive. For the affordable segment, some sops can be given to developers.
As we are entering a potential rate-cut cycle, how do you see it impacting demand for home loans?
If a rate cut happens, demand will further go up as affordability increases and more customers would want to take home loans. So, a rate cut will propel growth.
Interest rates on loans for affordable housing are usually higher. Isn’t this defeating the purpose of providing homes for the weaker sections?
In this segment, the risk is definitely higher compared to emerging and prime. And accordingly, you have to bake in this risk and then price it. And the idea is to try and get as many people into formal sector as many end up borrowing privately, where rates are exorbitantly high.
The RBI does not want banks and their subsidiaries to be in the same business. Since Punjab National Bank provides home loans, what steps are being taken?
It is too early. I think we’ll take it up as and when it comes because there is a draft circular issue.
Are there plans to raise funds onshore or offshore?
Currently, we don’t have any plans to raise funds via the offshore market. We have already raised $350 million via external commercial borrowings. We chose the ECB route because of the cost advantage compared to bank term loans.
Do you still see deposits as a challenge?
We have a very good deposit base. And in our liability mix, it’s good 28%. So, we are not growing our deposit book faster. At present, our cost of deposits is very competitive and lower than industry peers.