The Hindu Business Line : PNB Housing shifts focus to builders, realty developers

The company is planning to focus more on builders and real estate developers, as against individual home loan borrowers, in view of higher margins available in lending to this segment.

The company plans to offer loans for construction of commercial property and large-scale construction such as hotels, hospitals, malls and colleges.

The change in strategy is in response to the severely competitive market for retail housing loans, according to Mr V.K. Khanna, Managing Director, PNB Housing Finance.

He said the retail housing market had become unviable going by current card rates (between 7 per cent and 8 per cent) provided by various housing loan financiers.

"The yield on a 10 year Government paper is around 7.25 per cent. Why should financiers offer housing loans for 20 years at 7 per cent while running the risk of defaults, when it is more profitable to invest in government securities?" he asked.

On the other hand, giving loans to builders and real estate developers at a rate of 11 per cent and for a period of 3-4 years would offer better margins and faster turnaround of the money compared to loans given in the retail segment, according to Mr Khanna.

Asked about the risk element in lending to builders, Mr Khanna said that Sarfaesi Act, rising real estate prices as well as the precaution of lending to reputed builders, offered sufficient protection.

He said the company had already disbursed Rs 250 crore of loans to the retail segment this fiscal.

The company hoped to disburse another Rs 150 crore during the next 3 months. During the next fiscal the company plans to increase disbursements to Rs 1,000 crore of which Rs 250 crore will be targeted at builders.

PNB Housing is hoping to generate a profit of Rs 17 crore during the current fiscal.