I expect a minimum double-digit credit growth in FY21: Siddhartha Mohanty, MD & CEO, LIC Housing Finance

By Ankur Mishra

LIC Housing Finance (LIC HFL) expects to achieve a minimum double-digit credit growth for the whole financial year 2021. Siddhartha Mohanty, managing director and chief executive officer, LIC Housing Finance, tells Ankur Mishra that the lender has already reached pre-Covid levels in terms of disbursements. Latest announcements from the government on Thursday will also boost sales. Edited excerpts:

How much boost will be there for you and housing finance companies (HFCs) after finance minister’s announcements on tax relief for home buyers priced up to Rs 2 crore?
The relief will help boost sales in the mid-price and affordable segments. Developers will benefit as it will enable them to reduce their finished inventory. Estimates put around 5 lakh unsold units, across major markets in up to Rs 2-crore price range. The increase in differential between circle rates and agreement values from 10-20% under section 43CA is a welcome move and augurs well for home buyers as well as developers.

You have seen a credit growth of 5% in the September quarter, compared to last year. Do you believe this momentum will sustain?
The way we are seeing good response in the market. And there is a strong demand, many initiatives have been taken by the government. At present, our disbursal growth is there. On a month to month basis, September registered a growth of 21%, similarly a 37% growth was registered in the month of October. We have already reached pre-covid levels. So, coming to year-on-year, I expect a minimum double-digit credit growth for the whole year.

Where is the demand coming from?
In the retail business, huge growth is there. Everytime, we talk of affordable housing, the growth continues here, but in addition to that new things have happened. This time in mid segment and upper-mid segment, there also we are experiencing good growth. Due to the fact, prices have stablised, people are taking interest in mid segment-upper mid segment. Work from home has also prompted people to move in a bigger house for a stable price or less price.

What is the status of restructuring requests from borrowers? How many borrowers you expect to avail the scheme?
So far, we have received enquiries of 3-3.5% of our book size. These are the people who have just enquired. We are now working with that whether these people are eligible for restructuring or not. So, the numbers till December should remain under this limit.

Why do you think fewer people have opted for restructuring, despite 25% of your loan book being under moratorium till August, 2020?
Many people have started paying. Our collection efficiency shows 96% of the people have started paying. As much as 3-3.5% people have applied for restructuring. There has been some positive development, not that everybody wants to keep loan, take advantage, etc. So, those who have capacity have started paying.

What is your outlook on your non-performing assets?
We are experiencing a good collection and gradually economy is improving. I am very hopeful in the third quarter (Q3) at least, there should not be any further deterioration. It will either be stable, or there will be some improvement.

Your net interest margin (NIM) remained flat quarter-on-quarter (q-o-q) at 2.34%. Do you believe same level will be maintained in the rest of financial year?
Overall, it will be maintained or it will be still better. It will not deteriorate because our cost of funds has come down. There has been 1% reduction in the cost of funds from the first quarter (Q1) to the second quarter (Q2) of financial year 2021. The spread has also gone up year-on-year (y-o-y) from 1.98% to 2.21%. I am hoping that accommodative stance of monetary policy committee will continue. We will have a stable interest rate regime. So, I believe our NIM will not go down, there may be some scope of improvement.

Is there any change in the consumer behaviour?
People now are not postponing their decisions for buying a house, we have observed from the second quarter onwards. They are immediately taking decisions, because somehow demand has been created and there is no dearth of supply of credit, easily loan is available at the rate of 6.9%.