V Raghu, ED, Repco Home Finance is confident that the growth forecast given by the company in the past would be achieved and would go along with the loan growth figure estimated for FY18.
For FY18 the loan growth target is around 25 percent.
For the company, two-third of the book comes from rural area and one-third from urban and its peripheries.
According to him, the demand due to Pradhan Mantri Awas Yojana (PMAY) will likely pick up in FY18. He said once the demand for housing sector goes up then the consumption-led demand for the cement and steel sector will also go up.
Below is the verbatim transcript of the interview.
Nigel: I understand that your FY18 loan growth target is at around 25 percent. Does this not worry you that in fact, there is some pricing pressure coming in from banks? Are you still confident that you can maintain that 25 percent? And if you could tell us how much of your book comes in from the housing space as well as how much of it is from rural?
A: As far as the growth is concerned, I do not think we have any reason to change any of the estimates what we have been stating in the past. We will still continue to go with the estimated figure for loan growth in FY18. About two thirds of the book still comes from the rural areas and about one third is coming from urban or the peripheries of the urban areas.
Yes, the recent reduction in the interest rates, I would like to wait and watch how the situation goes further. We will also probably take a call and I would like to say that for companies like Repco Home Finance, the clientele segment is different when compared to the SBI or the HDFCs and the ICICI. So we would like to see how is the position and then we will take a call.
Latha: What has been the latest on the repayment front after demonetisation? You took a bit of a knock in terms of default loans. I think it went to 6.2 percent for your loan against property (LAP) segment and for the non-salaried segment, it was about 5.5 percent. Have things recovered?
A: I do not think I will be able to talk anything on that because the results have still not been announced and we are observing a silent period. So, I do not think I will be in opportunity to comment on those factors right now.
Latha: Then, broadly are you seeing FY18 or the first month of the year at least better in terms of loan demand especially from the Pradhan Mantri Awas Yojana?
A: The PM Awas Yojana, we expect the demand to pick up during FY18 and this also, the impact will be known only when the supply side also improves along with the demand side because the measures that have been announced on the interest rate reduction or on the subsidy are all from the demand side of the housing loan. We also need to look at the supply side. And once the supply improves, definitely the demand will also be met by the companies.
Latha: But are you saying there are not enough built, half-built, Rs 14 lakh, Rs 12 lakh houses?
A: The projects are on in some states, not in all the states, but some of the state governments have announced the projects. We are closing following that and wherever the states the projects are on, we will try to pitch in there to fund those customers.
Latha: Which states are the projects on?
A: In Maharashtra, some projects are there, Gujarat it is there, Rajasthan of course, we are not present, we have some projects coming up in Tamil Nadu and we are looking at these projects now.
Latha: A lot is riding in the stock markets on the assumption that the PM Awas Yojana will create so much demand for houses that we could have a consumption led growth in cement, in housing finance in real estate. Can you quantify this demand for us? How big can it be?
A: Definitely, if you are talking about cement and steel, probably housing sector is one sector which consumes a lot of cement and steel. Once demand from housing increases, the consumption led demand for steel and cement should also go up. Both, the housing and the infrastructure sector, once it picks up, the demand for these products also will go up.
Latha: That I agree. Once infrastructure demand picks up, it will grow. I am only asking you since you have been a veteran in the housing finance space, is the Awas Yojana going to mean a quantum leap in demand for homes in FY18?
A: Again, depending on the number of projects and the number of houses, all the houses which the government is planning to construct materialises during the current year, I will not be in a position to quantify the exact growth in the demand for cement or steel, but it will definitely pick up.
Latha: Do you see rates falling further? Would you see your margins under pressure?A: As far as the rates are concerned, since there has been not much of a change in the last policy also, this again, there is no change in the Marginal Cost of funds based Lending rate (MCLR) rates of the banks. Probably the rates will remain stable for the next 1-2 quarters.