Mumbai, February 3
There is a structural demand for housing and home loan disbursements will continue to see growth, said Keki Mistry, Vice-Chairman and CEO, HDFC Ltd. In an interview with BusinessLine, he said that the NPLs increased due to a change in accounting norms and said he doesn’t expect a rate hike in the February policy. Edited excerpts:
HDFC Ltd has shown strong growth in disbursments. Do you expect demand for housing loans to continue?
Yes, we expect the demand for home loans to remain robust for a long time. There are several structural reasons for this. First, the penetration levels are very low. The mortgage to GDP ratio in India is just about 10 per cent to 11 per cent. In most emerging economies, it’s over 20 per cent and in advanced economies, it is at 60 per cent to 70 per cent.
Second, we expect more urbanisation, which was also mentioned by the Finance Minister in the Union Budget. As urbanisation picks up, demand for housing will pick up in urban areas.
Third, the Budget was very growth-oriented. It will create more jobs and people will have more income, consumption, more jobs will be created and that feel good factor in the economy will contribute to demand for housing. My sense is demand will remain strong for a very long period.
Which are the segments where home loan demand will be high?
I expect it to be in all segments of the market. There was a little bit of slowdown in the metros in the higher-end markets in 2018 and 2019, in particular because there was so much of supply that people decided to delay purchases. But suddenly people have realised that when demand started picking up in 2020, there wasn’t so much oversupply in the market. A lot of people who were waiting also came forward. There is a structural increase in demand.
What is your expectation on interest rates?
Interest rates in the last two years have been extremely low but they can’t remain at that level forever. Interest rates have to start moving up but I don’t expect an immediate increase. It will happen over a period of time. I don’t think it will happen in the February policy.
Banks have become increasingly competitive on home loans. Has that impacted you?
No. We saw a 16 per cent growth individual disbursements in the first nine months of this fiscal. RBI data show that housing loans in the banking system have increase by a little over 9 per cent. If we have grown at a rate higher than banks then naturally, we have gained a little bit of market share and not lost market share.
Is business back to pre-pandemic levels?
We are better than pre-pandemic level in terms of demand and disbursements. Last year, even in the peak of the pandemic, we did see growth. In terms of collection efficiency, we are back to pre-Covid levels.
There has been an increase in non-performing loans. Why is that?
The reason for the rise in NPLs is because there has been a change in the method of calculating the NPLs. The RBI circular of November 2021 has said we can upgrade a loan only when every rupee due on the account has been received. Because of the change in the method, there is an increase of 30 basis points in NPLs. But the important thing is that the level of Stage 2 and 3 accounts have come down from 9.2 per cent in June to 7.8 per cent now. Collection efficiency has gone up to 98.9 per cent.
Do you see any impact of Omicron on the economy?
It has had a very marginal impact. There was no national lockdown. There was selective stoppage of certain activities in certain locations.