LIC Housing Finance open to partner with SFBs to step up home loan business, says MD and CEO

Adhikari highlighted that the lender had a good quarter overall but going ahead, reducing non-performing assets (NPA) would be the focus

Mortgage lender, LIC Housing Finance, is aiming to ramp up business partnering with small finance banks (SFBs) to explore lending opportunities to the home and affordable housing segments, Managing Director and Chief Executive Officer (MD and CEO), T Adhikari said.

“We are open to exploring opportunities of tie-ups and partnerships with SFBs in certain housing segments,” Adhikari said in an exclusive interaction with Moneycontrol on August 8.

The company hasn’t yet identified an SFB for partnership.

Also read: LIC Housing Finance Q1 results: Net profit up 43% to Rs 1,324 crore

In the recent past, SFBs have recorded aggressive growth numbers in the housing segment. For example, for the April-June FY24 quarter, AU SFB recorded a 12-percent growth in the home loan segment. Bengaluru based Ujjivan SFB recorded a 25 percent growth in the segment.

For the April-June FY24 quarter, LIC Housing Finance on August 3 reported a 43 percent jump in net profit at Rs 1,324 crore. The company had posted a net profit of Rs 925 crore in the year-ago period. The net interest income (NII) grew 38 percent to Rs 2,252 crore in the quarter under review from Rs 1,628 crore in the last fiscal.

Adhikari highlighted that the lender had a good quarter overall but going ahead, reducing non-performing assets (NPA) would be the focus. “We recorded a gross NPA (GNPA) of 4.98 percent in this quarter and in this fiscal year, our target would be to bring it down to 3.50 percent,” he said.

Post pandemic, demand for housing in India has risen due to a growing middle class looking to invest in real estate despite higher interest rates and home prices.

“Our growth target will be to grow by 12 to 15 percent this year. We have revamped several of our core services and with the growth in the sector, we see good growth ahead,” Adhikari said.

Earlier, in an interview with Moneycontrol, Ujjivan SFB MD and CEO, Ittira Davis, said that the bank plans to go aggressive on affordable housing. “Housing finance sector is poised to grow, and the demand will majorly pick up in the second half of the fiscal year (FY) 2023-24,” Davis said.

With the country’s largest private sector bank, HDFC Bank completing its merger with its parent company, HDFC Ltd on July 1, LIC Housing Finance has become the country’s largest mortgage lender with total assets under management (AUM) of Rs 2.90 lakh crore (as of June 30, 2023). Adhikari highlighted that after this merger, the lender is looking at competing with HDFC Bank, which has the largest home loan book in the country.

Also read: IndusInd Bank plans to partner with real estate companies to boost home loan book: MD & CEO

“We are now the biggest housing finance company (HFC). There is some competition from all the players, but we will look at narrowing the gap between LIC Housing Finance and HDFC Bank,” Adhikari said.

Segment growth

In the individual housing segment, the lender recorded a 28.3 percent fall on a year-on-year basis (YoY). The numbers fell to Rs 9,419 crore in June 2023 from Rs 13,133 in the year ago period. Similarly, project loan disbursements declined 18.8 per cent to Rs 251 crore.

Also read: MC Exclusive: Ujjivan SFB eyes double-digit growth in housing finance, to expand network in tier 2 and 3 cities, says MD & CEO

Adhikari said that mainly due to a revamp in the technical operations and systems, the mortgage lender had a dull quarter in certain segments. “We went through a major structural change where we opened 44 new cluster offices. We also worked on a total overhaul of our internal software which resulted in some delay in disbursements,” Adhikari said, adding that on project loans, the movement has been slow and cautious due to higher stress levels.

“Now we are looking at credible builders and mid-builders in the project loan segment and we would move cautiously,” Adhikari said.

Also, going ahead, segments where the lender sees good growth are semi-luxury and luxury housing. “In the semi and luxury housing space, we will grow in the coming quarters,” Adhikari said.