Kapil Wadhawan, chairman and managing director, DHFL shares his expectations on the upcoming Union Budget.
Below is the verbatim transcript of the interview.
Reema: Can you walk us through the housing finance sectors expectation from the Budget?
A: This is one sector which the government really accords top priority to. If you look at the government’s vision on housing for all by 2022, that itself will create a strong momentum going forward.
The 100 cities’s plan clearly shows the importance that the government is today putting on affordable housing for example. We see this as a big opportunity and a leap forward for the housing finance sector at least. The penetration rates in housing finance are very low as we all know 8 percent to GDP so there is big potential for this 8 percent move up anywhere between 16-20 percent over the next ten years.
What it means for housing finance companies in general and for the customers is whilst there are tax incentives; whilst there are prices seem to have moderated in a lot of the urban conglomerations within India as well as in semi urban cities. It will mean a good bonanza for home buyers and finally for home finance customers. Interest rates seem to be coming down which is also a big positive so yes there is lot of expectation from the Budget to keep the momentum going as far as the housing story is concerned.
Ekta: What kind of opportunity do you foresee in the small bank license space and how well do you fit in say even in terms of your average ticket size?
A: DHFL has been a low and a middle income segment lender for almost 30 years. Our average loan size is below Rs 15 lakh which gets the priority sector a treatment like any of the other lending activities of large commercial banks. Now the small finance bank license to us was a good opportunity to not just keep on focusing on the housing segment on the asset side but also have a wider pool of liability available for the growth that we envisage going forwards. Whilst it is too premature to comment at this stage because application has been launched just two weeks ago and anything if at all we will wait to hear from the Reserve Bank of India (RBI).
Reema: This is a hypothetical question if DHFL has to convert into a small bank what will be the necessary changes that you have to make in organisations to meet the requirements?
A: As I said it is too premature for me to comment at this stage because it is a process by the RBI if at all we get this licensee than it is good 18 month window. On the liability side we do not need much of intervention because we will continue to pretty much do what we are doing whether it is mortgages that is housing finance, education financing is what we have started about a year ago so that possibly will roll up into the larger institution. However, on the liability side obviously we will have to up the ante.
We will have to focus more on building that infrastructure but just to remind our viewers there that DHFL is also a deposit accepting housing finance company. We have been accepting deposits for almost 25-27 years now and we have strong pedigree in servicing those liabilities on a consistent basis. So, backed by AAA we will have to stretch ourselves on the liabilities side.