Interest rates are likely to remain stable for the next 3-4 months and may see a slight increase as the government tries to maintain its fiscal deficit target of 3.2 percent, according to the chief of country’s largest housing finance company HDFC.
Helped by extraordinary gains from the HDFC life IPO and a surge in affordable housing loans, Housing Development Finance Corporation (HDFC) reported a net profit of Rs 5,670 crore for the quarter ended December 2017, an increase of 233 percent over the Rs 1,701 crore reported in the same period in FY17.
Speaking to Moneycontrol, Keki Mistry, Vice Chairman and CEO of HDFC, said his company will continue to grow in all businesses including affordable housing, which is being pushed with the help of the government’s Pradhan Mantri Awas Yojana.
HDFC is also awaiting the approval of its shareholders to raise Rs 11,301 crore through private placement of shares, and a further Rs 1,896 crore through a qualified institutional placement (QIP).
Apart from one-time gains, what factors have contributed to business growth during the quarter?
We have seen good growth in individual loan disbursements, which grew by 27 percent in the nine-months. Also, 39 percent of total approved loans have been in the EWS (economically weaker section) and LIG (low income group) segments with about 8,000 loans. In value terms, it would be about 20 percent of total loans and monthly average approvals stood at approximately Rs 1,300 crore.
What is the average loan size given to these sections vis-à-vis the overall average for HDFC?
The average loan size is Rs 10.24 lakh for EWS and Rs 17.38 lakh LIG segment, while HDFC’s overall loan average is Rs 26.20 lakh. This reduced a bit from 26.6 lakh a year ago and 26.3 lakh in the previous quarter.
Will your focus change to these two segments from here on?
We are focusing on every aspect of the market. The lower income group has seen strong growth and hence we are not restricting ourselves.
Where do you think interest rates are headed?
Clearly, rates have bottomed out and I don’t see rates increasing in a hurry. They will remain static for the next 3-4 months and a host of factors that are not under our control will determine the way forward. Unless there is a big slippage in fiscal deficit though, I do not expect it to happen and I think it would be maintained at the level estimated.
If the fiscal deficit is kept under control, perhaps rates could come down a little. Oil and inflation are worries but markets have considered the fiscal deficit slippages and if that is not taken care of in the Budget, then rates could come down. This is for the B2B (business to business) segment. For consumers, it will remain stable for now.
The Economic Survey said that NPAs in the individual housing loan books of banks and HFCs have risen to 11 percent. Do you see it rising more?
I don’t think there is stress in home loans but the stress that you are referring to could be in the loans given against property (LAP) segment.
What about the self-employed category?
I don’t think so. In the self-employed category also there are different segments. You can have professionals like doctors, lawyers, chartered accountants or engineers. Or you can have businessmen like the local shopkeepers, kirana store owners, etc. Only that they may have to pay higher interest rates but there is no stress.moneycontrol