{"id":194397,"date":"2023-10-01T09:39:36","date_gmt":"2023-10-01T09:39:36","guid":{"rendered":"https:\/\/tokenstalk.info\/?p=194397"},"modified":"2023-10-01T09:39:36","modified_gmt":"2023-10-01T09:39:36","slug":"our-aim-is-housing-finances-siginficant-role-in-economic-growth","status":"publish","type":"post","link":"https:\/\/tokenstalk.info\/business\/our-aim-is-housing-finances-siginficant-role-in-economic-growth\/","title":{"rendered":"‘Our Aim Is Housing Finance’s Siginficant Role In Economic Growth’"},"content":{"rendered":"

‘We are working with a few housing finance companies to drive affordable lending because that’s where we believe our sweet spot is.’<\/strong><\/p>\n

<\/p>\n

Indian Mortgage Guarantee Company (IMGC), the country’s only mortgage guarantee firm, aims to ramp up its portfolio five-fold to Rs 1 trillion over five-six years.<\/p>\n

Mahesh Misra<\/strong>, managing director and chief executive officer of IMGC, spoke with Raghu Mohan<\/strong>\/Business Standard<\/em> on the plot ahead.<\/p>\n

What do you think will be the impact of the HDFC twins on the home loan business?<\/strong><\/p>\n

HDFC Bank has a very ambitious DNA; we expect this to translate into a higher appetite for market share.<\/p>\n

The race for the top spot between the State Bank of India (SBI) and HDFC Bank will hot up, but what this will also mean is that banks will have a disproportionate share of the mortgage industry, and 70-75 per cent of the home loan originations will be with them.<\/p>\n

As most banks typically tend to focus on the top-tier cities and on loans greater than Rs 25 lakh, housing finance companies (HFCs), especially those into affordable housing, will play a very critical role.<\/p>\n

I believe that for affordable-housing focus to sharpen, it’s imperative that some of the HFCs quickly build scale.<\/p>\n

The key will be HFCs backed by large industrial houses – access to capital along with the parent company’s rating is an added advantage as they will be able to borrow cheaply.<\/p>\n

So, what we will need is a couple of HFCs to build scale and quickly weave their way into the top slots.<\/p>\n

What stopped HFCs from scaling up?<\/strong><\/p>\n

If you look at the scenario, say five years ago, HDFC, LIC Housing, the erstwhile DH&FL, Indiabulls, and PNB Housing Finance were originating upwards of Rs 1,000 crore a month.<\/p>\n

What happened was that those with access to low cost of funds – and with the liquidity challenges that came after Covid – the larger players got a disproportionate advantage.<\/p>\n

It’s imperative for HFCs to build scale.<\/p>\n

Even in the case of DH&FL, the retail book was not really troublesome.<\/p>\n

HFCs have demonstrated that it’s possible to build a large book along with affordable lending even in the aftermath of Covid.<\/p>\n

The point is, the self-employed are facing a struggle; and if you look at the large players, the proportion of salaried borrowers in their origination mix is very high.<\/p>\n

HFCs having reasonable access to capital should be demonstrating ambition to build scale.<\/p>\n

We also believe that once the securitisation committee’s recommendations, and a couple of other initiatives, [come in] it will help the smaller HFCs operate with greater ease.<\/p>\n

Can you give us a sense of your ambitions in the mortgage guarantee business?<\/strong><\/p>\n

We have guaranteed about Rs 20,000 crore and expect to grow 40-50 per cent over the next 3-4 years after which our growth could taper off, to say, 20-25 per cent.<\/p>\n

Our ticket-size was Rs 26 lakh four years back; it’s now at Rs 19 lakh.<\/p>\n

We have a partnership with SBI and are in advanced discussions with three other state-run banks (LIC Housing is our largest lending partner).<\/p>\n

At the same time, we are also working with a few housing finance companies to drive affordable lending because that’s where we believe our sweet spot is.<\/p>\n

I think a portfolio of Rs 1 trillion is where we will get to over the next 5-6 years.<\/p>\n

We want to play a significant role in the growth of housing finance as a contributor to the economy.<\/p>\n

Nearly half of the housing finance originations happen in the top five-six cities.<\/p>\n

Most of the innovation has happened in unsecured lending.<\/p>\n

Secured lending practices still remain fairly archaic.<\/p>\n

Given the number of people for whom a housing loan is their first entry into the financial system, we are on the verge of rolling out a score drawing upon our experience with nearly 23 lending partners.<\/p>\n

We have the unique experience of access to claims data. We are piloting a score which will be largely for new-to-credit customers.<\/p>\n

And how does this compare with the initiatives in other countries?<\/strong><\/p>\n

In Canada and the United States, mortgage guarantee is compulsory.<\/p>\n

In India, it’s not so because our loan-to-value ratios tend to be lower; and the borrowers’ approach to a housing loan is different, as in, its repayment is probably next only to school fees in the hierarchy of repayments.<\/p>\n

It (mortgage guarantee<\/em>) is a great enhancement substitute in securitisation.<\/p>\n

That’s because many such transactions require the originator to keep a cash collateral, and a guarantee acts as a substitute.<\/p>\n

But more and more lenders are seeing the value of expanding the risk box with a guarantee.<\/p>\n

With the expected-credit-loss model, it will help as our guarantee covers their entire exposure.<\/p>\n

We have paid every single claim that has come so far; our credibility is well established.<\/p>\n

Feature Presentation: Aslam Hunani\/Rediff.com<\/em><\/strong><\/p>\n

Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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