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Tata Capital Housing Finance may not see much improvement in its Net Interest Margins this financial year, due to higher cost of funds and pressure from high inflation, said R Vaithianathan, Managing Director, Tata Capital Housing Finance.
In addition to this, expenditure on account of branch expansion is also likely to put pressure on margins. Currently, the NIM for the HFC is at 2% and it is likely to remain stagnant.
The cost of funds is around 9.6-9.75%.
As on end-August, the outstanding loan book was Rs 5,200 crore. Of this 15% was commercial loans and loan against property, and the remaining 85% was pure home loans. The company is looking to a growth of 40-50% for the next two to three years.
“We have specialised in loans to self-employed and the unorganised sector and our underwriting skills are geared to meet the requirements of this sector,'' Vaithianathan said.
In case of a self-employed borrower, the company looks at how long the borrower has been in business, the volume of business, if there are any cheque bouncing cases against him, his bank statements, other loan exposures and so on.
Given the slightly higher risk profile, the rate of interest for self-employed is slightly higher.
With effect from September interest rates are 10.4-10.7% for the salaried class and 10.6-11% for the self employed.
Currently, ratio of self-employed and salaried borrowers is 50:50. The Capital HFC raised its interest rates by 25 basis points on September 1 and is unlikely to offer any discounts during the upcoming festival season, due to the upward pressure on cost of funds, Vaithianathan said.
The fund composition for the Capital HFC currently consists of 18-20% from its parent company, Tata Capital, 20% through private placement, 5-10% through refinance from National Housing Bank and rest of it is from bank borrowing.
Compared to larger players like SBI and HDFC, in case of Tata Capital Housing Finance, the Loan to Value (LTV) ratio is 60%. This means that the borrower has to bring in 40% of the property price. In case of SBI the LTV ratio is between 75 to 90% and in case of HDFC it is 75-80%, depending on the loan size.
“Where we score is that we offer doorstep service and fast approval. Our gross non-performing assets is 0.29%,'' Vaithianathan said.
