Real estate industry representatives and analysts say that the market has seen a swift recovery despite the pandemic exigencies in 2021 with segments like residential outperforming other categories. The momentum in the residential segment is expected to continue with all favourable factors to purchase a house. D Lakshminarayanan, Managing Director of Sundaram Home Finance, a leading private lender in the housing segment, spoke to BusinessLine about the market recovery, growth factors, buyer behaviour and other opportunities. Excerpts:

What is your view about the recovery in the residential segment?

Our portfolio is largely concentrated in the South where I would say the recovery has been very swift since the second wave. It has been as good as it could get. There is now confidence among builders and the construction activity has also begun in full flow. In larger cities like Bengaluru, Chennai and Hyderabad, the construction activities are in full swing, while smaller cities and towns have also shown improvements with pick-up in self-construction activities. We have seen an across-the-board recovery largely backed by return of consumer confidence and their willingness to make the investment in a house property. The current rebound in demand is from the real end users. In the South market, the recovery has been the fastest in Hyderabad and that was the first off the block after the second wave.

What is driving the recovery in the realty sector?

Some of the government measures have supported the recovery. Firstly, the PM Awaaz Yojana to first-time buyers has certainly helped the offtake of smaller homes and it has indeed benefited the deserving segment. So, that is a very good move. Secondly, rationalisation of stamp duty reduction in markets like Maharashtra and Madhya Pradesh has certainly accelerated sales. If you are a home buyer, it is the best time to buy a property. There are a lot of positive signs currently in the real estate space. Prices have largely remained stable in the last 18 months. The interest rate is at its lowest in two decades. There is a wide choice of properties available to the buyer including near-finished apartments. The builders are offering huge sops and amenities. There are interesting schemes from the government as well. A combination of many positive factors coming together at the same time is great news for the buyer.

Have you seen a change in the preference of home buyers?

The pandemic has caused one big change in the last 18 months. It is now driving people to near-complete homes as compared to taking a bet on apartments coming up from scratch. Every home buyer wants to see the structure to come up as well as progress of the projects. There is an end-user demand in the market now, not an investor-led demand. So, there is no speculation like in the past. In our view, ₹30-75 lakh is the fastest growing segment driven by the salaried class and the self-employed in Tier 2 towns. As I said, we are seeing a preference for near-completed homes.

How do you see the growth potential outside of metros and big cities?

The opportunities for us are clearly outside the metros now and we are seeing big potential in Tier 2 and 3 towns. We believe we have a clear competitive advantage in these locations where our target will be self-employed and self-construction segments. Our understanding of these customers and the product customisation is a differentiator in these markets. We expect these markets to do well into the future. This will be a big growth area for us in the next couple of years.

What are your disbursements and fundraising targets this fiscal?

Our target is to achieve double digit disbursement growth this year and hope to do better than the disbursement numbers of FY20. We are also hiring this year and could look at around 150 people, a large part of it in Tier 2 and 3 towns. This is also an indication of the return to growth in the real estate space and a sign of confidence. We will continue to focus on the South market. This is an exciting time to be in the housing finance business. Our plan is to raise ₹3,500-₹4,000 crore. In H1, we had raised about ₹1,600 crore and the plan is to raise about ₹2,000 crore in the second half.

Is your asset quality seeing an improvement?

We restructured some of our customer accounts post the second wave. But we have now clawed back to near pre-wave 2 levels and hope to see better numbers on the asset quality front, going forward.