PNB Housing: Festive Home Loan Demand Status Check | Girish Kousgi Share Details & Expectations

Summary

In this interview, Gish kogi, MD and CEO of PNB Housing Finance, discusses the current state of the housing finance sector. He mentions that while festive season offers may not be as significant due to high demand and strong sector performance, there could be minor processing fee waivers. He also addresses the challenges faced by banks in lending for home loans due to lower spreads and strong credit offtake elsewhere. Kogi predicts that long-term rates may experience a slight drop but will remain stable, not returning to previous lows. He reflects on the price war in the HFC market and suggests it's calming down, with a focus on emerging and affordable segments for better margins. Lastly, he touches on the impact of liquidity on HFCs and the balance between salaried and self-employed borrowers.

Takeaways

• 🏦 Gish Kogi, CEO of PNB Housing Finance, suggests that while there might be some festive season offers, they won't be major due to high demand and the sector performing well.
• 📈 The housing finance sector is currently doing well, with demand increasing every quarter, which might limit significant discounts on home loans.
• 💼 Banks are currently less inclined to lend for home loans due to lower spreads compared to other types of loans, where they can earn more.
• 📉 The banking industry is facing challenges with deposit raising, which might lead to a slowdown in credit growth or an increase in deposit mobilization efforts.
• 🏢 The demand in the housing sector is strong and is expected to continue growing, providing opportunities for non-banking financial companies (NBFCs) and housing finance companies.
• 📉 Long-term rates for the industry are hard to predict, but there might be some rate cuts in the coming year, with rates expected to stabilize rather than drop significantly.
• 💹 The price war in the HFC market, which was intense in 2021-2023, is likely to subside due to banking sector challenges and a shift in consumer savings towards other asset classes.
• 🏠 Real estate prices have increased significantly, affecting the average loan ticket size, which has gone up. However, future price increases are expected to be more moderate.
• 💧 Liquidity for HFCs has not been a challenge post-COVID, and with the Reserve Bank of India easing liquidity, conditions are expected to improve for HFCs.
• 💼 PNB Housing's strategy includes a mix of salaried (60-66%) and self-employed borrowers, with a focus on emerging and affordable segments for better margins.

Q & A

What is the general trend for home finance companies (HFCs) during the festive season?

While HFCs have historically offered special deals during the festive season, this year might not see major offers due to high demand and the sector performing well. Any offers could be limited to waivers in processing fees rather than deep discounts on rates or fees.

Why are banks currently hesitant to lend to home loans?

Banks are not keen on lending to home loans because the spread is lower compared to other types of loans. With strong credit off-take, banks can enjoy better returns by lending to corporates or for working capital requirements.

What challenges are banks facing that could impact HFCs?

Banks are facing challenges with deposit raising, which has become difficult. This could lead to adjustments in the capital adequacy ratio (CAR), potentially requiring banks to mobilize more deposits or slow down credit growth, which might open opportunities for NBFCs and HFCs.

What is the outlook for long-term interest rates in the housing finance industry?

Predicting long-term rates is challenging, but there could be a slight drop during the year. The rate drop cycle might start but will take time, and it's unlikely to return to the very low rates seen previously or exceed high rates of 13-14%. Rates are expected to stabilize and be more consistent in the coming years.

Is the brutal price war in the HFC market from 2021-2023 considered over?

To a certain extent, yes, due to banking sector challenges and changes in deposit flows. However, with good demand and aggressive strategies from HFCs, there could still be competitive growth rates in the industry.

How have real estate prices and ticket sizes for HFCs changed recently?

Real estate prices have increased significantly in the last few quarters, affecting the average ticket size which has gone up. However, it's expected that prices will consolidate and not increase drastically in the future.

How does the liquidity situation for HFCs look in the current financial climate?

Post-COVID, liquidity has not been a challenge for HFCs. Market borrowings and bank term loans have softened in pricing, and with the Reserve Bank of India no longer tightening liquidity, conditions are expected to improve, potentially leading to rate drops.

What is the current focus of PNB Housing in terms of customer segments?

PNB Housing has a balanced strategy, focusing on both salaried and self-employed individuals. The current retail split is approximately 60-66% salaried and the rest self-employed.

How does the government's focus on affordable housing impact the customer mix for HFCs?

The focus on emerging and affordable housing segments has led to a higher share of self-employed customers, as these segments offer better margins. For affordable housing, the ideal mix is 50-50 between salaried and self-employed.

What is the impact of real estate price corrections on the housing finance industry?

The correction in real estate prices that started in 2020 has led to an increase in ticket sizes across all retail segments. However, going forward, price increases are expected to be moderated, and the market is anticipated to stabilize.