Consumption demand is increasing across segments in the real estate sector: Siddhartha Mohanty, LIC Housing

Siddhartha Mohanty, Managing Director and CEO, LIC Housing Finance, talks about real estate performance in last few months, loan disbursement, COVID's impact on the recovery of the loans, expectation from the union budget among others during a candid chat with Anil Singhvi, Managing Editor, Zee Business. Edited Excerpts:

Q: It is being talked that the last two-three months have been very good for the real estate sector and there has been a huge sale of the houses. Has the housing finance companies have seen similar trends and has there been a big increase in disbursing loans in the last three months?

A: As far as realty sector is concerned, after September, we realized that a lot of growth is happening in this sector, especially in every segment. Earlier, it was restricted just to the affordable segment but in the last two months, we realised the mid-segment, upper mid-segment and premium segment are also growing significantly.

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Today is the most favourable time for the realty sector, which was grappling with two issues in the past (i) liquidity and (ii) demand. And, if seen at present, there is a lot of liquidity for the realty sector and demand - which always had a question that when the demand will be there - and last year we saw that there was no demand. But fortunately, this year, the consumption demand is gradually increasing across the segments, it was there in the Affordable segment but now as I said, it is there in mid, upper-mid and luxury segments.

Q: What kind of people are taking more housing loans, that is, salaried class or fixed income class are more or now business class and investor type people are also taking loans?

A: A major part of LIC Housing portfolio belongs to the salaried class, approximately 86-87% part of our portfolio belongs to the salaried class. But, now, I am seeing that in addition to these, rest of the people, who have not been affected much due to the corona and even those who have been affected a bit - because the atmosphere is very favourable now - are also coming. It is not so that only salaried class is coming but business people, as well as people engaged in different professions, are also taking loans.

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Q: Maximum part of your loan portfolio belongs to the salaried class and many people have lost their jobs during this COVID. So, are you facing any issues in recovering the loans, if yes, then is it getting back on track?

A: Government and the Reserve Bank of India (RBI) have taken steps at the right time in view of the COVID. The moratorium that was granted twice ended in August and I would like to inform you that maximum of the borrowers, who availed moratorium at our end, have paid their EMIs but they took it because there was an uncertainty in the mind, due to which they opted for the moratorium. If seen today, after the moratorium, we are seeing more than 96% of the collection is happening. As far as NPA is concerned, I feel, the NPA will remain almost stable, there can be a marginal change in both directions. But there is a good thing as we have also made recoveries from some big accounts in the last quarter. Going ahead, I believe, the asset quality will be maintained, there will not be much increased in NPA and we will definitely move on the growth path.

Q: What the housing finance sector needs from the budget?

A: We will also want the same that everyone else from the housing sector wants. However, I would like to thank the government for taking decisions time-to-time for this sector. There is Pradhan Mantri Awas Yojana (PMAY), a credit-linked subsidy scheme for the MIG segment was supposed to end last year in March but its duration was extended till March 2021. So, I expect that the government should increase its duration again till next year. Secondly, there is an additional tax benefit of Rs 1.50 lakh, besides tax benefits of up to Rs 2 lakh, on the housing loans up to Rs 45 lakh, and I expect that the government should also extend the period for the same.

The government has set a target to provide Concrete Houses to everyone by 2022 under housing for all scheme and LIC Housing Finance has played a significant role in it and we wish to complete it 100%, so, we would like to request the government to provide one more year to it so that we can attain our target.

Q: Do you think that it is the best time to buy a house for those who want to do so?

A: Based on my 35-years of experience, I think this is the best and favourable time to do so because the interest rates are one of the lowest today and you are getting housing loan at the rate of 6.9% in the market, the government has provided tax benefit, the first-time buyers are also getting the subsidy of the Pradhan Mantri Awas Yojana. Apart from this, the builders are also providing many SOPs and benefit incentives. Following all this, we have also discounted our processing fees, in which there is no processing fee for loans up to Rs 50 lakhs and 50% processing fee will be applied on loans above Rs 50 lakh. You are getting loans up to Rs 15 crore at 6.9% rate of interest. If you have a look at the price, the real estate price has not increased and it stable, in fact, the prices have fallen by around 1-2% in a few big cities.

Keeping this in mind, those who want to buy a house should make their decision, do not delay as it is the right time for it. I have also experienced the second thing that the end-users are buying but a new trend - which paused in between - of investors and they have also started buying houses and this is across the country. It is not so that it is happening in just seven big cities. in fact, we are getting demand even from Tier-II and Tier-III cities and a lot of loans is being disbursed from our end.