Home financier’s MD sees profile of loan seekers returning to pre-COVID pattern
The number of enquiries home builders are getting now compared with six months earlier has gone up and is an indication of how demand is recovering, said D. Lakshminarayanan, MD, Sundaram Home Finance, the housing finance arm of Sundaram Finance.
“Construction activity is a very important parameter [for us to follow],” he said. “The number of new launches in recent months and the progress in construction of existing projects indicate that confidence is coming back into the market.”
Though the pandemic had suppressed new home project launches in the first half of the current financial year, pent-up demand led to ‘a lot’ of the unsold inventory being absorbed, Mr. Lakshminarayanan said. “For the first time in the last two years, the number of new launches was less than the absorbed units in the top eight cities in India.”
Though he is of the view that residential projects will see a return to a ‘buying’ pattern, he said the industry would have to wait and watch as to how different the new demand will be. “Only time will tell if there will be a shift in location (to non-urban centres) among real estate buyers and if the size of the units will be different going forward.”
He pointed out that tier 2 and 3 towns had been doing well in the last six month as have the satellite areas of the cities. “In the smaller towns, we have found that there are no debates among prospects on a ‘buy versus’ rent evaluation, which typically happens in the city. There, it is always a buy. Self construction and buying of plots has been on the rise and that is encouraging. The rural segment will certainly grow. As a strategy, we believe that smaller towns such as Salem, Erode, Namakkal, Guntur, Vijayawada, Cuddapah, Belgaum, Mangalore and Mysore have potential to grow.”
“Affordable housing was the first one to get off the block following the lockdown and the space is getting extended into areas beyond the metros. Encouragingly, the traders and the non-salaried segment seem to be leading the charge.”
As to how his first year since taking over as MD at the housing finance firm now looked in the context of the pandemic, he said, “I had a set of 6-7 things that I planned to do when I was to take over as MD from April 1 last year. I did none of those and have not revisited any during the year. This was not going to be a year when the focus was on growing business by 15-20%. Portfolio quality assumed a lot more significance and disbursements took a back seat in the initial phase. Focus on growth was to be dealt with later.”
Queried whether the pent-up demand post the easing of the lockdown had shown signs of fizzling out, he said, “Activity started off slow in August and September and has improved significantly since. In that phase, we wanted to see if it was just the pent up demand and the initial euphoria that was leading to business. However, in the last couple of months, we have come to nearly the pre-COVID levels [ie, comparable to Dec 2019] in terms of volumes. The enquiries that builders are receiving and the flat bookings are endorsing this. The profile of people coming for home loans too is coming back to what it was earlier with self employed at around 55% levels.”
Mr. Lakshminarayanan is also looking to selectively hire, an indication of demand for homes and home loans. “We will be looking to selectively hire frontline staff in markets that have potential to grow. We expect to hire in pockets of A.P. and T.N., including in places like Kanchipuram and Vellore.”
In 2020-21, the company raised ₹4,400 crore but unlike a typical year when a good size of the fund raising would have been for growth, this year the fund raising had also been done to rejig the liabilities profile, ‘taking advantage of the rates on offer as well as to provide buffer to the liquidity requirements’. In the coming year, SHF plans to raise funds for growth in disbursements, which Mr. Lakshminarayanan said he hoped would be much higher than in 2020-21.
On the outlook for the home finance sector, he said, “Affordability of housing has improved, prices have remained fairly muted, interest rate is at an all time low, there have been offers from the builders and sops from the Government. For the first time in recent history, all of these are happening all at the same time. The demand has been pushed up by various factors and there is supply to match this. The signs are encouraging enough.”