PNB Housing: Festive Home Loan Demand Status Check | Girish Kousgi Share Details & Expectations
Summary
TLDRIn 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.
Outlines
🏠 Housing Finance Market and Festival Offers
Gish Kogi, CEO of PNB Housing Finance, discusses the housing finance market's performance during the festive season. He suggests that while there might be some limited offers, such as waivers in processing fees, major discounts on rates or fees are unlikely due to high demand and the sector's strong performance. Banks are currently more inclined to lend to corporates or for working capital requirements due to better spreads. The conversation also touches on the challenges faced by banks in raising deposits and the consequent impact on credit growth. Kogi anticipates that long-term rates may see a slight drop but will remain stable, not returning to the lows of 6.5-6.75% or exceeding 13-14%. He reflects on the price war in the HFC market in 2021 and 2022, led by State Bank of India and PNB, and suggests that while the competition may have eased, the demand for housing finance remains robust.
📈 Real Estate Price Trends and Liquidity for HFCs
The discussion shifts to real estate price trends, noting a correction that began in October 2020, with prices in certain markets surpassing pre-COVID levels. Kogi anticipates that prices will consolidate and not increase drastically in the long term. The conversation also addresses liquidity for housing finance companies (HFCs), with Kogi indicating that liquidity has not been a challenge, even during COVID, due to market borrowings and bank term loans. He expects rates to start dropping soon, which should benefit the HFC industry. The focus on the salaried class for housing loans is highlighted, with PNB Housing maintaining a balance between salaried and self-employed borrowers. The government's focus on emerging and affordable segments is noted, with a higher share of self-employed borrowers in these segments. Lastly, Kogi shares insights on the average ticket size for loans, which has increased significantly in the last year due to rising real estate prices.
Mindmap
Keywords
💡Housing Finance Companies (HFCs)
💡Festival Offers
💡Processing Fee
💡Credit Off-Take
💡Deposit Mobilization
💡CD Ratio
💡NBFCs
💡Long-Term Rates
💡Price War
💡Ticket Size
💡Liquidity
Highlights
PNB Housing Finance's CEO, Gish, discusses the possibility of festival offers in the home finance sector.
Demand for home loans is high, and companies are performing well, suggesting limited festival offers.
Banks are currently not inclined to lend for home loans due to lower spreads.
Banks face challenges in deposit raising, affecting their Credit Deposit (CD) ratio.
Opportunities for NBFCs and housing finance companies as banks may focus on other loans.
Long-term rates are expected to stabilize, with no drastic drops to pre-COVID levels.
The brutal price war in the HFC market led by State Bank of India and PNB Housing is likely behind us.
Real estate prices have increased significantly, affecting the average ticket size for HFCs.
PNB Housing has seen an increase in the average loan ticket size over the past year.
Liquidity for HFCs has not been a challenge post-COVID, with multiple sources available.
The cost of credit has been a challenge for some HFCs, but liquidity has not been an issue.
PNB Housing's strategy includes a mix of salaried and self-employed borrowers.
Government and housing finance companies have focused on emerging and affordable segments for better margins.
PNB Housing maintains a 60-40 split between salaried and self-employed borrowers.
The focus on salaried borrowers varies depending on the cost structure and desired margins.
The interview concludes with a discussion on the outlook for the festival season and demand.
Transcripts
Gish kogi managing director and CEO of
pnb Housing Finance joins us now Gish
good morning thank you for joining us
we've historically seen that in and
around Festival season home finance
companies hfcs they come out with what
could be called as Festival offers are
we in for a repeat of the same this year
where Festival offers could come they
could start as early as the
Shera good morning n so I think if you
typically look at any year quarter 3 and
quarter 4 you know would be the best
ever quarters in the year and the
festive season starts from quarter 3 so
uh we can't rule out there could be some
offers but
not it won't be really major one because
the demand is so high and most of the
companies is doing well sector is doing
well so whatever offer is there I think
that could be limited to know some waver
in the processing fee otherwise it won't
be any Deep Discount in terms of of
rates or the
fee this is happening because
banks are right now in no mood to lent
to Home Loans because in home loan your
spread is lower and when your credit off
take is so strong if you are even
lending to a corporate or even if you're
lending for working capital requirement
you enjoy better stress so more bank for
buck for banks at least is not in HFS
Home Loans it is in other loans
I think if you look at the banking
industry now most of the banks know they
are facing challenge because deposit
raising has become a bit of Challenge
and because of that CD ratio has to be
corrected so two things could happen one
is they need to mobilize more deposits
or in some way they may have to go
little soft on grade growth so I think
that would in a sense open up
opportunity for the nbfc and housing
finance companies having said that I
think demand in this sector housing
sector is very very good and it is
increasing with every passing
quarter and where do you see the
long-term 10year rates and 20e rates
settling for the for the industry
now I think that will be a very
difficult question to answer I not an
expert but I think yes sometime during
the year we could see a bit of uh drop
it would I think the cycle would start
but it will take time we were
anticipating this to happen anytime
during quarter 2 or quarter 3 now it
looks like it might get slightly pushed
towards end of the financial year but I
think uh coming year we could see some
rate Cuts but having said that longterm
if you see it will be more stable I
don't think so we'll ever go back to you
know uh rates where uh the rate went
down to about 6.5
6.75 on the home loans or on the other
side it will not even go beyond 13 14% I
think it'll be more stable consistent if
you look at last few quarters the cost
has been going up rates have been going
up now this is the cycle where the rate
drop would start uh and it'll be more
consistent in next couple of years back
to that original point of mind which is
that couple of years ago and this was
like 2021 and 2022 a little bit in 2023
we saw what could be called as a brutal
price war in the hfc market State Bank
of India and pnb led it from the front
since that time they had lot of Kasa and
a lot of uh savings were moving into
Kasa into a lot of savings were moving
into fixed deposits largely because of
the covid impact State Bank of India and
pnb housing I I distinctly remember had
cut their hfc
offerings you think that brutal price
war in the hfc space is behind
us I think to a certain extent it'll be
behind given the context of the
challenges what the sector you know more
from a banking uh point of view is
concerned because the CD ratio has to
get corrected and also today if you look
at I think the money is not really
flowing into as deposits prits getting
into other asset classes and therefore
at least for next four to six quarters
we may not see very severe competition
from the banks having said that since
the demand is quite good lot of housing
finance companies are getting more
aggressive
and you could see good growth rates for
the
industry on the other side is that real
estate prices have gone higher on an
average we are talking about 50 becoming
70 and 70 becoming
150 do you see that for hfc's the
average ticket size which used to be in
and around 20 lakh Rupees at India
average that has multiplied are you also
seeing that at P&B housing the loan
wherever you are dispersing them the
average Base number has gone up
significantly in last one year I think
if you look at the real estate industry
during covid the prices know went down
significantly in certain markets and I
think the correction started from 2020
October onwards in last five to six
quarters it has gained lot of traction
and the prices are back there are
certain markets where the price have
gone up you know more than what was
anticipated but I think going forward
the price could uh consolidate and uh
definitely with this the ticket size
across all the segments in retail
whether it is super prime prime emerging
has actually gone up so it has helped in
a way but in the from a long-term
perspective the the price shouldn't
increase drastically so I think now it
was only a correction because the rates
had gone up during covid and postco
slowly it recovered I think most of the
markets today real estate know prices
are quite stable going forward
price increase you know could get
moderated uh I'll also like to draw your
attention to where the liquidity is
moving for hfcs while we've spoken about
you know how banks in a sense are
getting options if the liabilities are
less they want to perhaps lend into
Pockets where spreads are higher and hfc
spreads are lower I'm setting the
context for our viewers here but given
that Reserve Bank of India now is no
longer tightening liquidity and
liquidity is going to get easier and
easier how will that change life for
hfc's I think for uh housing finance
companies liquidity uh postco has never
been a challenge during covid of course
there was a challenge post that has
never been a challenge because to I
think if you look at last two three
quarters I think Market borrowings have
little softened in terms of pricing Bank
term loans have gone up because of
various uh know requirements various
changes know what has gone through in
last few quarters so as I mentioned the
cycle will change very soon maybe end of
this year and the rates could start
dropping I think cost of uh loan would
be a problem cost of credit was a
challenge for last couple of quarters
for some of the uh players in the nbfc
hfc space but not uh credit per se so
there was enough liquidity and there
were multiples sources from which hfcs
and Banks could hfc and industries could
Source only thing is the challenge was
on cost I think now that will know start
going down so it should really help the
industry both nbfcs and
hfc's
okay everybody is focusing on the
salaried class everybody I speak to even
your payers they say that look we only
want to pay or give it to folks where
there's a predictable cycle in terms of
understanding the payback at pnb housing
what is the split salaried versus
non-salaried
class I think pnb housing as a strategy
we changed a strategy a couple of years
back so in terms of profile we like
salary
self-employed uh and self-employed
nonprofessional so all the three we like
but if you have to look at split within
retail it's about 60 566 and the rest is
self-employed 66% is salary and the rest
is self and we would like to maintain
this mix on the profile but if you look
at the focus from government if you look
at the focus of most of the uh housing
finance companies at least in last few
years the focus has been really on
emerging and affordable because that is
where uh know they would get better
margins and be more profitable so uh the
minute you get into emerging and
affordable uh there has to be a share
which has to be significantly higher
than 30 35% on the self-employed pce if
you look at affordable the mix ideally
would be 5050 50 is salaried and 50
self-employed if you talk about some of
the matured segments like super Prime
and Prime where typically almost all the
banks PSU private Banks large housing
finance companies Focus so there the
focus would be more on salary I think it
all depends on the cost structure and
the margins you know which they settling
to so if you want more margins you need
to move segments more towards highing
segments and the mix would change more
skewed towards self-employed and if uh
if any institution is pretty okay with
the margins then they would focus more
on salary but I think appreciate your
time sir really appreciate your time and
good luck for the festival season demand
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