The Hindu Business Line

‘GST is no longer a damp­ener for the hous­ing sec­tor’

- G BALACHAN­DAR Business · Finance · Real Estate · BNP Paribas · Madras · India · Kerala · Karnataka · Hyderabad · Tamil Nadu · National Housing Bank · Electric & Musical Industries, Ltd.

Sun­daram BNP Paribas Home Fi­nance (Sun­daram Home) plans to con­sol­i­date its pres­ence in the south­ern mar­ket, even as it en­ters new mar­ket seg­ments this fis­cal. In an in­ter­ac­tion with Busi­nessLine, Srini­vas Acharya, Man­ag­ing Direc­tor, spoke about the pol­icy mea­sures, re­cov­ery in de­mand, and af­ford­able hous­ing seg­ment. Edited ex­cerpts:

How do you view the Bud­get pro­pos­als for the hous­ing sec­tor?

The Bud­get pro­pos­als are a clear pos­i­tive for the hous­ing sec­tor, es­pe­cially the af­ford­able home cat­e­gory. I see this as a solid growth seg­ment, and is cur­rently wit­ness­ing over­heated de­mand. Be­cause of the sub­sidy and or­gan­ised con­struc­tion, we are see­ing good pick-up in this seg­ment, and the de­mand is high. We ex­pect this pos­i­tive trend to con­tinue in the fore­see­able fu­ture. About 42 per cent of our book would qual­ify for af­ford­able hous­ing cri­te­ria.

What about GST-re­lated is­sues?

Teething ini­tial is­sues re­lated to GST are behind the sec­tor. It is no longer a damp­ener. The rate has come down to a level (5 per cent) that has made it af­ford­able to buy.

A lot of fo­cus has been on the liq­uid­ity chal­lenges in the home fi­nance sec­tor? Did you face chal­lenges?

While so much has been writ­ten on the is­sues re­lated to liq­uid­ity, the prob­lem in the home fi­nance sec­tor as well as in the NBFC space has been re­stricted to a few in­di­vid­ual com­pa­nies, and it was not a sec­tor-wide is­sue.

Liq­uid­ity was not a prob­lem for Sun­daram Home Fi­nance, even when the is­sue was at its peak in Q3 last year. Hav­ing said that, the cost of funds did go up af­ter Septem­ber 2018, but this has come down over the months. Over­all, the in­crease (in cost of funds) has been mar­ginal.

Of course, one of the key is­sues that the home fi­nance sec­tor has grap­pled with for a long time is the lack of long-term debt in­stru­ments.

There is an as­set-li­a­bil­ity mis­match in this sec­tor. It is im­por­tant to bridge the gap be­tween the pe­riod of the assets (which is usu­ally 15-20 years for hous­ing fi­nance com­pa­nies) and the fund­ing avail­able (five to seven years). We get long-term debt from NHB.

What are your fund-rais­ing plans this fis­cal?

We are look­ing to raise ₹3,600 crore this year through a mix of deben­tures, term-loans from banks, fund­ing from NHB, and pub­lic de­posits. We have about ₹1,300 crore of pub­lic de­posits.

Have you seen any struc­tural changes in the hous­ing sec­tor in re­cent years?

Certainly. It is be­com­ing far more or­gan­ised than it was ear­lier. It is no longer a small builders’ game. The launch of RERA (Real Es­tate (Reg­u­la­tion and Devel­op­ment) Act) has been a real pos­i­tive move for the sec­tor, with buy­ers get­ting solid pro­tec­tion from vi­o­la­tions and de­lays by builders, though the gov­ern­ment has to strengthen the hands of the au­thor­ity in ad­min­is­tra­tive terms to han­dle com­plaints.

The ra­tio be­tween EMI and rent has widened a bit in re­cent years as rentals have not in­creased in a big way. I feel the rental hous­ing con­cept could pick up in the coun­try. The Te­nancy Act may have to be mod­i­fied a bit for the con­cept to catch up faster.

When it comes to Chen­nai, in­creased FSI will drive re­de­vel­op­ment of old flats, and this will pull peo­ple from out­ly­ing ar­eas to key lo­ca­tions within the city.

What will be Sun­daram Home’s fo­cus ar­eas this year?

We have a two-fold growth plan. On the one hand, we will look to fill un­cov­ered ar­eas in the south­ern mar­kets, while on the other, we will tread cau­tiously into newer mar­kets. East­ern and western In­dia, where we made for­ays over the last few years, have been do­ing well. We would like to have steady growth in th­ese mar­kets.

In the south­ern States, there are a num­ber of Tier 2 lo­ca­tions to ex­plore. In Ker­ala, we are cur­rently present in 21 lo­ca­tions, and have been do­ing fairly well, es­pe­cially in the North Ker­ala belt. We will look to ex­pand in South Ker­ala, as it holds a lot of po­ten­tial in the long term. We are also wit­ness­ing good growth in Kar­nataka. We are see­ing a clear re­vival in Hy­der­abad and Te­lan­gana.

Tamil Nadu is a very im­por­tant mar­ket for us, and we will con­tinue to ex­pand our pres­ence in the State. About 18 per cent of our busi­ness is from the Chen­nai mar­ket.

In terms of growth in dis­burse­ments, we are tar­get­ing 10 per cent this year. We are con­sciously slow­ing down on growth in the non-hous­ing seg­ment (loan againt prop­erty/ mort­gage loans) and are fo­cussing on the home seg­ment.

One of the key is­sues that the home fi­nance sec­tor has grap­pled with for a long time is the lack of long-term debt in­stru­ments. There is an as­set-li­a­bil­ity mis­match in this sec­tor

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