Keki Mistry, CEO of Housing Development Finance Corporation, said home loan de mand has come back after the initial hitches post demonetisation. In an interview with Shilpy Sinha, Mistry said this is the best time to buy homes as interest rates are low and property prices have seen time correction.Edited excerpts:Your non-individual loans have grown faster than individual ones.Is demand for home loans still low?
Our non-individual loans are growing marginally faster than individual ones. But it is not very consistent.Non-individual loans are lumpy, so there may be some quarters when growth is higher and some when growth will be lower. Our, individual loans have grown by 16%, non-individual loans by 17%. If you look at the full year, loan growth in non-individual category has been in lease rental discounting. If we have to look at the incremental loan book, individual loans is 71%, lease renting and discounting is 19% and corporate and construction finance loans are 10% of growth in the loan book. We saw growth from outskirts of cities like Mumbai, Delhi and Bengaluru.
Was there any change after demonetisation?
After demonetisation, we did see slowdown in demand for individual loans as people started holding back their plans to buy, expecting property prices to come down. Over the period, cash element in real estate has come down significantly.There is a tax law which says that if you sell a property, your sealed price will be deemed to be higher than the price that you have actually transacted or the price that is indicated in ready reckoner. There is no incentive for anyone to understate the value of property. So, I don’t believe property prices will come down.
Are you saying that home loan demand has come back to normal?
In November, December, there was slowdown on expectation of a fall in property prices. New applications for home loans started growing from January. January had 21% growth over December; February had 16% growth over January; and March had 44% growth over February. It has not just come back to normal, in my view, it is the best time to buy property. First, by virtue of the fact that interest rates are significantly low. Since 2008, we have not seen rates as low as this. I don’t believe rates will go down any further.Second, property prices haven’t gone up in recent times so one would believe there is time correction of prices. Third, all incentives are provided by the government for people to buy houses.
How big is the takeover of home loans?
It would be marginal. If you look at our pre-payment levels, it came down last year. Last year, our prepayment levels were 11.4% of our opening loan book. This year, it has fallen to 10.7%.
Your asset quality has been stable, but provisions have gone up.
There are two kinds of provisioning -standard assets and non-performing loans. Provisioning depends on loans. If it is given to an individual, standard provisioning is 0.4% and in case of non-individuals, standard provisioning is 1%. Because this quarter growth was in the non-individual segment, mainly lease rentaldiscounting segment, standard asset provisioning is 100 basis points.
The government is talking about a new NPA policy giving more power to the RBI in NPA resolution.How do you see that affecting banking industry?
The most important thing is to give confidence to bankers to take a decision on writing a loan and restructuring a loan. Today, there is some amount of hesitation. People are worried that if they make a decision in the best interest of the bank today, someone can question their decision three or five or 10 years later.They may say there was an ulterior motive on why the loan was written off and why was the loss incurred.Confidence will come back if some immunity is provided to bankers. I honestly believe this will go a long way in tackling the bad loan problem. Practically, things will move.There are certain projects that have got delayed because of environment clearance issue, some are because of global commodity prices. It is not that the entire debt is unsustainable. Today, entire loan gets classified as non-performing loan.For unsustainable debt, if the banks were to write it off, banks need the confidence that nobody will ask them why they did it.
Where does the HDFC Life and Max Life merger stand?
From media reports, we understand Irda (Insurance Regulatory and Development Authority) has sought opinion from attorney general and is awaiting response.
Is HDFC Ergo and L&T General merger complete?
Merger process is pending NCLT clearance. It should happen in a month or two. All integration is complete.