80% of loan book covered under affordable housing scheme: Repco Home

Low cost housing has got a substantial boost from the government and up to Rs 12 lakh of home loans have received interest subvention.

Talking about the benefits of this scheme, V Raghu, ED of Repco Home Finance said about 80 percent of company's book is covered under the affordable housing scheme.

The annual household income covered under the scheme is between Rs 3 lakh and Rs 18 lakh per annum.

In an interview to CNBC-TV18, he said for FY18 the assets under management (AUM) growth is expected to be around 20 percent.

Below is the verbatim transcript of the interview

Sonia: How much this scheme could spur demand for homes especially in the low income category and for a company like yours what could the immediate benefits be?

A: As far as the affordable housing scheme announced by the government of India under the Prime Minister Awas Yojna, this is going to improve the affordability of houses to people in the lower income group. Therefore, a family with an annual household income of Rs 3 lakh onwards up to Rs 18 lakh are covered under the credit linked subsidy scheme. So definitely this will be a boost for the people who are looking to buy a house according to their income levels. This will definitely increase the demand for housing from this section of the population.

Similarly the government has also announced concessions on the supply side also. Therefore, the challenge will be from the supply side and once supply is going to match the demand - the hosing for all scheme will be a great boost to the economic growth of the country.

As far as companies like Repco Home Finance are concerned about 80 percent of my housing loan book is covered under this scheme, up to annual income of Rs 18 lakh, so almost around Rs 6,000 crore in the existing loan book is covered under the scheme. So this will be a tremendous boost for future growth for the company in this segment.

Latha: Have you figured out the mechanics of the receipt of money. We were given to understand that the moment you get a borrower and you clear it with National Housing Bank (NHB) that this is eligible for subvention, the entire subvention amount comes in, several lakh comes into the consumer's account immediately?

A: Yes, the moment we file the claim with the central nodal agency, for us it is a National Housing Bank with whom we have signed the MoU, the moment we send the details of all the loans which comes under this particular scheme and once the National Housing Bank verifies the eligibility of these loans, the interest subsidy amount is received upfront for the entire loan, what we have claimed for and we receive it within 48 hours, the maximum time they have taken is about 5 days and the subsidies are released within 48 hours and we have already claimed, under the earlier economically weaker sections (EWS) and lower income group (LIG) subsidy scheme we have claimed the amount and we are confident, our systems are in place to claim the subsidy amount for the nodal agency.

Latha: So the lump sum amount goes into the account of the housing finance company, not the borrower?

A: The moment we receive the subsidy, the lump sum amount, the money is credited into individual account. So with a result the individual account's principal amount comes down immediately, for example in EWS scheme for 20 year loan we get a maximum subsidy of around Rs 267,000. So the moment we receive Rs 267,000 in an individual account, the principal amount comes down immediately by that amount, so the EMI also gets reduced by about Rs 2,500 odd per month.

Sonia: You said Rs 6,000 crore of loans are covered under this scheme for your own company. What would this do to the loan growth in FY18 compared to what you saw in FY17? How much of a boost can one expect?

A: When I said Rs 6000 crore, I took whatever was outstanding loan book as of end of December 2016, I did the back of the envelop calculation. However, the scheme is going to be operative from January 1, 2017 for the middle income group. It says that maximum numbers of loan accounts which are going to disburse from January 2017 will fall under this category and we will be in a position to do that. Rs 6,000 crore - I was talking on the overall loan books. We expect probably whatever the new loan book which is going to generate from January onwards, I think a maximum amount of that can be covered, for example if I do growth of Rs 2,000 crore approximately in a year probably a maximum amount of that, about 80 percent of that can be covered under this scheme.

Latha: What is your AUM now? What are you looking at by the end of FY18?

A: My AUM at the end of December was around Rs 8,700 crore and we expect to close this year; it's not guidance, at Rs 9,000 crore or so. So we assume or we expect growth of around 20 percent on this book over the next year. So that's the loan growth or asset under management over FY18.

For entire interview, watch accompanying video.