A cut in banks' home loan rates is unlikely to hurt Dewan Housing Finance, as it caters to the housing finance needs of low- and middle-income groups, says Chairman and Managing Director Kapil Wadhawan, in an interview with Krishna Pophale. Edited excerpts:
At what rate are you borrowing from banks? Would you be able to maintain your margin this financial year?
We lend to an important sector of the economy. So, we generally secure funds at the base rate (the floor interest rate charged by banks), or a few basis points above the base rate. At the end of June, our bank borrowing stood at about 68 per cent. Our net interest margin has been close to three per cent in the last couple of years. This year, too, we expect to maintain the margin at 2.75-3.00 per cent.
A few banks, including State Bank of India, have cut home loan rates. Also, now, borrowers don't have to pay a pre-payment penalty on housing loans. Are your customers shifting to banks?
The demand for housing in the country is huge, and so is the need for housing loans. Currently, there is a shortfall of about 40 million units. We cater to the segments that don't have access to long-term housing finance at low rates--primarily the lower- and middle-income groups. Most of our borrowers are not too interest rate-sensitive; they are sensitive about the quality of service. Therefore, a rate cut of up to 50 basis points would not have a significant impact, in terms of flight from our books to banks.
You said the demand for housing was not being met. However, in a city like Mumbai, home registrations have been declining.
Yes, we have seen a slowdown in construction, particularly in Mumbai. But Mumbai is not the whole country--we have other markets. Demand continues to be robust, particularly in Tier-II and Tier-III markets..
What do you think of the demand for housing in the coming festive season?
Overall, demand is subdued. We expect 25-30 per cent growth this year, owing to demand from smaller towns. In the current environment, I think even 20 per cent growth is sustainable.
When would the integration of Deutsche Postbank Home Finance be completed? What are your plans for that business?
We have renamed it First Blue Home Finance, and we hold the majority stake in it. The process is expected to be completed in the third quarter. We have acquired the company to cater to the middle- and higher middle-income groups, in which the average ticket size would be about Rs 23 lakh.