Home loan rates are likely to rise, Ashwini Kumar Hooda, deputy managing director, Indiabulls Housing Finance points out that delinquencies in affordable housing are high only in the lowest loan brackets and the Rs 15-35-lakh bracket has seen delinquencies fall.
Home loan rates are likely to rise, Ashwini Kumar Hooda, deputy managing director, Indiabulls Housing Finance, tells Shritama Bose, pointing out that delinquencies in affordable housing are high only in the lowest loan brackets and the Rs 15-35-lakh bracket has seen delinquencies fall. Excerpts:
How has business been in FY18, considering the implementation of RERA?
After the demonetisation, we saw RERA come into operation and then we also had GST getting implemented. Now what RERA did was, there was a bit of pause in new launches because people were busy registering for their projects and structuring things to meet the deadlines under RERA. That put a lot of new projects on hold. The second part was the GST, which again impacted a lot of developers in the sense that suddenly this 12% extra charge over the service tax had to be paid. Projects which were near completion were put on hold. There were those two impediments, but, overall the market held fairly well. We’ve seen it grow 16-18% for the year, which resulted in good home loan demand growth. What was positive for the year was the PM’s subsidy scheme, because of the existing tax benefit, a home loan is effectively costing 3%, instead of 8.5%. So, there was a huge impetus in the entry-level housing loans of up to Rs 50 lakh. There has been good pick-up in the resale market.
Which are the states where you have seen the RERA infrastructure stabilise?
The main cities for the market are Mumbai, Delhi-NCR, Bengaluru, Chennai, Pune and Hyderabad. In these cities, we already have RERA in place. So, from a RERA perspective, 90% of the market is compliant now.
What is your outlook on interest rates?
We have already seen SBI raise its rates by 20 bps and they have passed on that hike to their existing customers. We are just waiting for the RBI monetary policy to take a decision. We can assume that transmission for higher costs that we are incurring on the liabilities side will be passed on to the consumers.
In the third quarter, your builder book had grown by about 32%. Despite the instability around RERA, how have you seen such growth in that book?
What has happened was the whole liquidity and optimism around commercial buildings and rental buildings was very high in the last few quarters. So, we are doing more and more lease rental discounting structures with developers and in the absence of clarity on a lot of these structural issues, the pace had gone slow. So, we would not do pure-play construction finance. We would marry construction finance with lease rental discounting. So, we were able to grow even in construction finance.
In recent days, there has been some concern around the build-up of stress in affordable housing as well as LAP. What has your experience been?
You will appreciate that India never had a Rs 2-lakh home loan earlier. The below Rs 10-lakh market was restricted to loans of Rs 6-7 lakh. So, there is a plethora of new players who have come into the market and they are targeting ticket sizes between Rs 1 lakh and Rs 6 lakh. This being the first time that credit is being advanced to that category, there would be some mistakes people make. Also, rural distress increased because of poor rains two years ago. So, there have been instances where loans below Rs 6-7 lakh really underperformed. In the Rs 2-lakh category, the vulnerabilities have been as high as 12%. But, if you look at between Rs 10 lakh and Rs 25 lakh, the delinquencies have actually gone down from 0.7% to 0.6%. Our ticket sizes range between Rs 15 lakh and Rs 35 lakh and there delinquencies have come off.