> Client ac­qui­si­tion rate> branch ex­pan­sion rate

Dig­i­tal lend­ing plat­form and foot­print will be the en­abler:

Banking Frontiers - - Reliance Home Finance - Me­hul@bank­ingfron­tiers.com

Re­liance Home Finance pro­vides a wide range of so­lu­tions like home loans, af­ford­able hous­ing loans, loans against prop­erty (LAP) and con­struc­tion finance. The com­pany has a strong dis­tri­bu­tion net­work, through a ‘hub and spoke’ model, across the coun­try, serv­ing over 45,000 client ac­counts.

The to­tal dis­burse­ments by the com­pany stand at `8695 crore (US$ 1.3 bil­lion), a yoy in­crease of 19%. In FY18, the com­pany had dis­bursed `14.91 bil­lion across 14,400 cases in af­ford­able hous­ing (growth of 40% yoy) and `23.36 bil­lion across 4700 cases in home loan prod­ucts (growth of 14% yoy). As much as 75% of its home loan dis­burse­ments are made for the self-em­ployed class. The av­er­age ticket size of af­ford­able hous­ing loan is about `13 lakh and that of home loans is `61 lakh.

COUN­TRY­WIDE SPREAD

Ravin­dra Sud­halkar, ED & CEO, shares the geo­graphic spread: “Our port­fo­lio is spread across the coun­try with a focus in the west, which con­trib­utes 60% of the port­fo­lio. North and south com­bined add an­other one third to the port­fo­lio.”

MEDIUM TERM OUT­LOOK

HFCs in In­dia have been able to grow at a faster pace, ow­ing to their focus on seg­ments such as self-em­ployed and af­ford­able hous­ing, which have higher growth po­ten­tial. Mort­gage pen­e­tra­tion lev­els (mort­gage loans as a per­cent­age of GDP) in In­dia, is at 9.6% which is sig­nif­i­cantly lower com­pared to de­vel­oped economies. The con­tin­ued in­crease in pop­u­la­tion, lower age of the first-time home own­ers, ris­ing ur­ban­iza­tion and nu­cle­ariza­tion have also led to greater de­mand for in­di­vid­ual hous­ing.

Sud­halkar says over the last 5 years (FY12-FY17), the hous­ing credit growth has re­mained steady de­spite a tough oper­at­ing en­vi­ron­ment. He points out that the In­dian hous­ing finance mar­ket has grown at a 5-year CAGR of 18% with the pace of growth of HFCs and NBFCs be­ing higher at 21% vis-a-vis 18% for banks.

The in­ter­est rates at Re­liance Hous­ing Finance has been mir­ror­ing the over­all mar­ket, which at the low­est level was at 8.35% in 2017-18. Says Sud­halkar: “The cur­rent in­ter­est rate, ap­pli­ca­ble for home loans and af­ford­able hous­ing loans, is at 8.55%. We have tie-ups with ap­prox­i­mately 2500 builders.”

The ef­fec­tive rate of in­ter­est is lower be­cause of the tax in­cen­tives on home loans for both prin­ci­pal and in­ter­est re­pay­ment and sub­si­dies un­der CLSS for EWS, LIG and MIG seg­ments, points out Sud­halkar, adding: “We ex­pect the hous­ing finance sec­tor to grow at a CAGR of 20% over the medium term; how­ever, the sub seg­ment of af­ford­able hous­ing loan will grow up­wards of 30%. The growth will be sup­ported by pick-up in pri­mary sales, new launches and a healthy growth in the af­ford­able hous­ing seg­ment and the fa­vor­able reg­u­la­tory en­vi­ron­ment (post-RERA era).”

EYE ON AS­SET QUAL­ITY

Gross NPAs of Re­liance Home Finance for the en­tire port­fo­lio have been sta­ble at 0.8% for the last 4 quar­ters. GNPAs in home loan and af­ford­able home loans have been slightly better than the port­fo­lio at 0.75%.

Sud­halkar says the com­pany is choos­ing to grow its busi­ness cau­tiously, keep­ing an eye on the as­set qual­ity. While it re­mains fo­cused on ca­ter­ing to af­ford­able hous­ing seg­ment, it is con­sciously sourc­ing cases above `7.5 lakh, in cat­e­gory B&C cities and more that `10 lakh in cat­e­gory A cities. “The ob­jec­tive is to un­der­write those cases where the cus­tomer has a credit his­tory to draw an in­fer­ence from,” says he.

EX­PAN­SION PLANS

The com­pany grew at a faster pace than the in­dus­try, and im­proved its prof­its (PBT `272 crore). Its cost-to-in­come ra­tio im­proved to 38% in FY18 vis-à-vis 55% in FY17.

The­com­pany in­tends to ex­plore sales of com­ple­men­tary prod­ucts like in­sur­ance. Says Sud­halkar: “We have sub­mit­ted an ap­pli­ca­tion for reg­is­tra­tion to act as cor­po­rate agents to IRDAI, which will al­low us to cross-sell life in­sur­ance and gen­eral in­sur­ance prod­ucts.”

The com­pany has 54 branches and serves more than 125 lo­ca­tions across the coun­try. It launched 11 new branches, in­clud­ing 4 branches for af­ford­able hous­ing seg­ment, dur­ing 2017-18. “We look to take this number to 75 branches which will serve close to 200 lo­ca­tions in the cur­rent fi­nan­cial year. How­ever, as we in­crease our dig­i­tal foot­print we ex­pect more clients to be sourced through our dig­i­tal lend­ing plat­form. In the fu­ture, the number of branches may not grow in the same pro­por­tion as that of our client ac­qui­si­tion rate,” says Sud­halkar.

Ravin­dra Sud­halkar pre­dicts the sub-seg­ment of af­ford­able hous­ing loan will grow up­wards of 30%

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