Demonetisation is not purely the reason for the slightly slower demand for housing loans, says Keki Mistry MD & CEO of HDFC In an interview to CNBC-TV18.
Demonetisation is not purely the reason for the slightly slower demand for housing loans, says Keki Mistry MD & CEO of HDFC in an interview to CNBC-TV18.
The housing finance company Monday reported nearly 12 percent year-on-year increase in third quarter net profit to Rs 1,701 crore. It was impacted by higher provisions and tax cost but supported by net interest income growth.
Mistry said people have been holding back purchases assuming prices will drop and that is why the sales for builders has been lower. However, based on his experience, and five similar industry cycles he has witnessed, he says it is advisable to invest whenever a property looks suitable rather than wait for price corrections.
Below is the verbatim transcript of Keki Mistry’s interview to Ritu Singh on CNBC-TV18.
Q: What was the impact on smaller loans and the kind of recovery the company has seen two months after demonetisation?
A: I would say that the impact is not only because of demonetisation. The impact on the slightly slower demand for individual housing loans has been more because people start thinking that property prices will come down and therefore people tend to hold back on their purchase. Let us talk about the individual separately and the non-individual separately. That would probably explain why sales for builders has been lower in the last couple of months compared to where it used to be. My personal view in this regard is that whenever you think the family likes the house, the house is affordable, the income of the individual is stable he has the ability to buy the house he should not buy the house or he should not hold back on their purchase thinking that prices will come down.
If I go to my 35 years with HDFC we have seen at least five cycles like this. The last cycle having been in 2008-2009. 2008 Lehman Brothers happened and after Lehman prices came down a little bit, more than prices coming down there was people held back on their purchases for houses and then all the countries in the world started ejecting liquidity. Because of their excess liquidity interest rates came down, sentiments were better, stock markets improved and from July 2009 to March 2010 in that period of nine months we saw the fastest increase ever in property prices, unprecedented price in property prices.