We expect good demand to continue from realty sector: LIC Hsg Fin chief

In a Q&A, Y Viswanatha Gowd, MD & CEO of the HFC attributes the uptick in demand for home loans to stabilising interest rates and completion of large projects

LIC Housing Finance expects encouraging growth numbers in FY24 on the back of big real estate projects nearing completion and interest rates stabilising, MD & CEO Y Viswanatha Gowd tell Manojit Saha in the interview:

How has your business grown in 2022-23? What are the projections for the financial year 2023-24?

For the nine months to December 2022, our disbursements have grown at a healthy 13 per cent. Most of this was in the retail segment. The growth comes despite disruptive global headwinds. I expect the good demand in the real estate sector to continue in the new financial year too. We're seeing a spike in new project launches across all the cities-–even in tier-3 towns. With good connectivity and the government’s strong infra push, many infra projects will be near completion and we will surely see a lot of real estate traction in those locations. These will add a lot of buoyancy in terms of demand for homes. I am sure in the new financial year we will see very encouraging growth numbers.

Loan disbursements were tepid in the third quarter for LIC HF. Was there a pick in the fourth quarter?

Loan disbursements were slightly tepid because we think many borrowers decided to wait and watch to access how far the rates will move. Now I think the situation has more or less stabilised. So there will be a shift in buyers’ preferences. Those who were in wait-and-watch can now slowly start buying. Having said that, the effect of earlier pent-up demand also tapered, leading to a normalised growth rate. We have competitive products and interest rate offerings to sustain demand. We expect these things to bring favourable results in the days to come.

You talked about real estate project launches. Will you increase the share of developer loans?

Earlier our project book was 7 per cent of our portfolio, but now this has come down. Now we are very selective in our approach. With this approach, the builder book also will slightly improve in the days to come.

Are rising interest rates impacting home loan demand?

In this floating-rate scenario, it is quite possible that when interest rates go up, EMIs go up commensurately. And now the interest rates are going up fast and steep. However, stability is expected as the peak level is nearing and I think after that there may be some interest rate reversal in the days ahead. But the demand for home loans has been stable because the end-user segment is very active. End-users are those in the need of housing. Demand from that segment is very much in place. With interest rate stabilising, we would see a very good uptick in home loan demand in days to come.

LIC HF was cutting down the builder loan book which has an NPA of 45 per cent. Have you seen resolution momentum picking up?

Resolutions are in good place and our recovery teams are doing a good job. With very good recovery teams and very good collection efficiency, we are certain that asset quality will improve.

Credit costs went up sharply in Q3, to 1.15 per cent due to an increase in provisions of the stage-3 book. Has it normalised in Q4? What is the guidance for FY24?

We consciously decided to keep the provision coverage ratio robust. That is why we made adequate provisioning in Q3. Going forward, the asset quality is certainly going to improve. We have software to capture early warning signals. Credit costs for FY24 will be more or less stable or it may come down.