Home loan interest rates will increase slightly, but will be below 9%: Indiabulls Housing Finance

Indiabulls Real Q4 | Loss at Rs 110 cr versus profit at Rs 109 cr, revenue fell to Rs 116.3 cr versus Rs 1,821.54 cr YoY. (Image: indiabullsrealestate.com)

Interest rates on home loans are likely to remain below the average 9 percent in FY19, Ashwini Hooda, Deputy Managing Director, Indiabulls Housing Finance, told Moneycontrol.

"Interest rates were expected to go up but this will be a shallow interest rate for borrowers. Going by the historical average in the last seven years, it was around 9-9.5 percent. (But) I don't see the rates going up by more than 9 percent (for FY19)," he said.

Hooda's comments come a couple of days after the Reserve Bank of India (RBI) hiked its benchmark repo rate for the second time in two months by 25 basis points to 6.50 percent.

A basis point is one hundredth of a percentage point.

On Thursday, Indiabulls Housing Finance also announced its financial results for the quarter ended June. The company's consolidated net profit for the quarter rose 30 percent on year to at Rs 1,049 crore.

For the quarter under review, its rival and the country's largest home financier HDFC (Housing Development Finance Corporation) reported a 54 percent growth in net profit, largely due to healthy growth individual loans, especially in the affordable housing segment.

On the other hand, Indiabulls Housing Finance is betting big on the premium and mid-income home loan segment this fiscal year.

Hooda said that mid-income housing was the biggest driver of growth in the reporting quarter. "These are loans between Rs 15-50 lakh with house prices between Rs 25 to 65 lakh… Overall, home loans grew at 40 percent led by mid-income housing loan growth," he said.

Home loans constitute 60 percent of the financier's portfolio, with the rest almost equally divided between lease rental discounting and corporate or developer loans (20 percent each).

Indiabulls Housing Finance's loan book grew 33 percent on year in the June quarter, which is among the fastest for large housing finance companies, Credit Suisse said in a report.

"The premium segment, which was not active in the last two years, has seen activity in the first quarter and it is growing as we speak. Currently, the premium segment is seeing demand in Bengaluru, Mumbai, Delhi and some traction in Pune market," Hooda said.

He added that Indiabulls Housing Finance mainly lends to white-collared workers or blue-collared workers at multinational companies (MNCs).

"I would concentrate on the premium housing, which are prime customers in the tier-2 and tier-4 cities, where property prices are low but targeting salaried class, government employees and good quality private company employees," he said.

With growth picking up, the company raised nearly Rs 13,000 crore from the debt market during the quarter gone by and is looking to raise a similar amount in the current quarter.

The average ticket size of loans disbursed by Indiabulls Housing Finance is around Rs 25 lakh.

The company's gross non-performing assets (NPAs), or bad loans, as a percentage of total loans, fell by 2 basis points to 0.78 percent as at the end of the quarter. Its net NPA ratio, however, came in 25 basis points higher at 0.59 percent.

"Growth will come from Tier-3 and 4 cities going forward. We opened 80 branches in the last 12 months and will open another 60 over next 12 months," Hooda said.