Vinay Sah, the MD and CEO of LIC Housing Finance, is keen as mustard about affordable housing. With the government recently increasing the carpet area of houses eligible for interest subsidy for the Middle Income Group (MIG), he expects the demand for affordable housing loans as well as the average loan ticket size in the category to go up. In an interview to BusinessLine, Sah, who took over LIC HFL in April 2017, underscored the fillip in demand for affordable housing, observing that his company may end the current financial year (FY18) financing almost four times more affordable housing units than it did in FY17. Excerpts:

Affordable housing seems to be the flavour of the season. What do you make of it?

The government has put great emphasis on affordable housing. The awareness of affordable housing down the line is tremendous. Now, affordable housing is governed by a set of parameters – it should be your first purchase, area of house, and all those things. So, they [the government] has given relaxation for MIG [with the area of the flat that can be purchased going up].

Before the relaxation only smaller flats were eligible for [interest] subsidy, whereas income-wise, if you see, the highest income slab up to which one can get subsidy, provided other parameters were met, was ₹18 lakh….So, now with this change in criteria, probably a larger section of people would be entitled to the subsidy, and this is a positive development.

How many affordable homes have you financed in FY18 so far?

Previously, affordable housing covered only the EWS [Economically Weaker Section] and LIG [Low Income Group] categories. Last financial year [on December 31, 2016], an announcement was made that Credit Linked Interest Subsidy Scheme would be available to MIG beneficiaries with effect from January 1, 2017.

Operational guidelines for the CLSS for MIG were unveiled in March. We had financed 4,000 affordable housing units in FY17, mostly in the EWS and LIG categories.

In the current financial year, we have financed 6,600 affordable housing units till October 31.

With the relaxation in the eligible carpet area, probably more affordable housing units will be sold. So, we may end FY18 financing about 15,000 such units. The total number of housing units financed by us in the financial year so far [till October 31, 2017] is about 1.10 lakh. Of this, 6,600 units were in the affordable housing category, and we have already sanctioned loans for more than 8,800 such units.

Some banks have cut home loan rates to 8.30 per cent.

How are you facing the

interest rate war?

Besides interest rate, there are other factors too, including the turnaround time and the servicing part [the convenience that a customer gets and whether he gets the service where he wants], that go into a customer’s decision to take a home loan from a particular lender. Last month, SBI pared the home loan rate to 8.30 per cent.

However, none of the housing finance companies have tweaked their rates because they are already functioning at very low rates.

The low interest rate on home loans by SBI and other banks comes with certain strings attached. For example, some banks say the low interest rate is applicable only on home loans up to ₹30 lakh; some say it is only for salaried women; some say it is for those with a credit score above a certain level.

So, ultimately they are covering only a small segment of the market, constituting about 3-4 per cent of the overall home loan market, via the low interest rate offering. Whereas if you see the balance market, we [HFCs] are also the lowest. HFCs are also offering home loans at 8.35 per cent or so. This [low interest rate on home loans] is only a rate to be advertised to catch attention.

Are there any product innovations that you are working on?

We have been designing products with certain elements that are unique. We have a product with a flexible interest rate option [rate of interest is fixed for the first few years and switches to floating interest rate thereafter]. We are also talking in terms of another product – loan transfer – directed towards those people who want to come to us from other lenders, whereby customers will get two free EMIs if they continue the loan for five years with us. Along with this comes the convenience of doing business with us.

What will be the impact of more players joining the housing finance bandwagon?

The market is very big. There is potential for players to take a slice of the cake. With more and more players coming in, probably we have to put in more efforts to see that we get our share. The competition is there. Even banks have become more aggressive towards the housing finance business.

So, you [players] have to be more on the street. But I still feel that there is enough for everyone.

Will the average ticket size of affordable home loans go up following the increase in the carpet area of houses eligible for interest subsidy?

At the retail portfolio level, our average home loan ticket size is in the ₹21-22 lakh range. The average ticket size of the affordable housing loan portfolio is about ₹8 lakh.

With the announcement on relaxation in the eligible carpet area for the MIG segment, the average ticket size of the affordable housing loan portfolio will go up to ₹10-12 lakh.

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