Though banks have access to cheaper source of funds for their home finance operations compared with standalone housing finance companies that depend on market borrowings, the latter's profit margin does not suffer on this score, according to Mr Srinivas Acharya, Managing Director, Sundaram BNP Paribas Home Finance Ltd (SBHFL).
He expects SBHFL, which has maintained a growth of about 60 per cent in the recent past, to continue with the growth momentum for some more time before its annual growth rate stabilises, matching the industry trend.
Speaking to
Parental reach
He said a major factor that aided the robust growth of his company was that it was able to leverage the reach of its parent Sundaram Finance. This provided a solid customer base of self-employed customers, mainly in the transport business. Normally, this segment of borrowers find it tough to secure home finance. But as SBHFL was able to access their credit history from its parent, it was able to offer a unique window to meet borrowers' home finance needs. Nearly 40 per cent of its customers belonged to the self-employed category.
Mr Acharya sought to correct the perception that banks enjoyed an edge over independent housing finance companies as the former had access to cheaper fund sources due to current account savings account (CASA) operations, compared with HFCs that depend on market borrowings. He said ‘raising capital has never been a problem' for his company and it was able to adjust lending rates to match deposit rates since the lending was on floating interest rate basis and did not suffer any margin erosion compared to banks.
The HFCs were preferred because they offered a bouquet of services under one roof, had better understanding of the projects and ensured faster processing of applications etc.
Mr S. Rajagopalan, GM & Head-Operations, SBHFL, Chennai, said, before 2002-03 when banks aggressively entered the home finance business, the share of HFCs-banks in home loan lending was 60:40 per cent. This has since been reversed to 40:60 after the banks entered the home loan lending segment aggressively. But the annual growth rate of both segments is equal now even as the market size has changed dramatically.
He said in Coimbatore region, his company enjoyed a market share of about 11 per cent. The monthly disbursement in Coimbatore by home loan lenders, including banks, was around Rs 80 crore.
Mr Archarya said his company, which had 51 branches at the end of last year, plans to have 75 by the end of current fiscal. In fact, it has already, in the first half of the current year, opened 13 of the 24 branches planned for the year. Apart from a branch in Kolkata, its branch network is mostly in Tamil Nadu, Karnataka and Andhra Pradesh and a few in Kerala.
Focus on South
Mr Acharya said being a South-focused company had its advantages as well. The South Indian real estate market has remained relatively stable compared with other regions in the country and as most of the projects were smaller in size in the South, the builders also did not face cash flow problems compared with builders in other regions who promoted mega projects.
His company had kept away for the present from lending to real estate developers and was also choosy about lending to borrowers for second homes. While he felt that the high interest rates may not sustain for a long time, he said good borrowers continued to get finance for home purchase.
Commenting on the future of the partnership between the two promoters, he said BNP Paribas had to exit the mutual funds joint venture in Sundaram BNP MF because of regulatory reasons and not because it wanted to do so. But BNP considers its home finance venture with the Sundaram Finance group, in which it has about 49 per cent stake, as one of its ‘best joint ventures' globally.
In fact, after exiting the MF venture, BNP has teamed up with Sundaram group for back-end and security services work.
On a question as to whether his company would go public, Mr Acharya said he did not think so. Both joint venture partners were in a position to fund its activities. Moreover, the company would prefer an orderly growth and grow in a controlled way, comfortably servicing capital.