Updated on: Monday, October 25, 2021, 05:21 PM IST

FPJ Interview: Fast appraisal model at HDFC has onboarded 88% digital borrowers, says MD Renu Sud Karnad

Renu Sud Karnad, Managing Director, HDFC ltd |

Renu Sud Karnad, Managing Director, HDFC ltd |


Till mid of June 2021, HDFC had the highest number of loan beneficiaries at over 2,50,000 with cumulative disbursements of about Rs 43,000 Cr and a subsidy amount of Rs 5,800 Cr. It appears that the pandemic gave it a pass. FPJ caught up with Renu Sud Karnad, Managing Director, with HDFC ltd to know how the company consolidated its position despite the global health crisis.

HDFC joined the recent ‘interest-cut’ bandwagon a little later than others, any particular reason?

Interest rate is just one of the variables in the entire process and hence a 5 to 10 bps lower or higher rate may not necessarily influence the decision to avail a loan from a particular lender. HDFC’s special offer of 6.70% pa is for the upcoming festival season and is to facilitate prospective house buyers to realize their house buying dream and bring festive cheer.

Having said that there are other important aspects apart from interest rates one needs to keep in mind, which may have long term implications on the entire transaction. Housing loans are long term loans and hence several factors like expertise, quality of service, domain knowledge and the company’s level of commitment and transparency right through, company’s loan procedure, the product range, fine print that goes along with the interest rate, documentation, quality of services offered and safe retrieval of the title deed and other relevant documents of the property deposited as a security for the housing loan on closure of the loan, are critical. While all other aspects would be constant during the entire term of loan, interest rates being variable can increase based on the cost of funds for each lender. So just basing the decision to borrow from a particular lender because the rate offered is lower by 5 to 10 bps is a question one should ponder over before selecting a particular lender.

Borrowers also needs to think carefully about the property they are planning to buy whether the property is right, the track record of the builder in terms of timely delivery, etc.

Does the decrease in interest really coerce people to apply for a property loan or are most of these fence sitters?

Lower interest rates do help but they are just one of the variables as stated earlier. What is more important is the property one is buying and the service being offered by the lender. One must keep in mind that home loan is a long term commitment of 15-20 years. Interest rates do not move in one direction. In developing country like India, there is a limit to which interest rates can go down. If the interest rates are lower today, then they will go up again once the Economic growth picks up.

Also the current lower interest rates are at a time when housing is much more affordable than it ever was. In the last couple of years, property prices have more or less remained the same across the country while income levels have gone up. Therefore, interest rates along with combination of other factors are pushing the demand.

Any adjustments in eligibility criteria post pandemic?

Eligibility criteria will get tighten for certain industries which have been affected by the pandemic and it is in the interest of these customers that they don’t leverage beyond their capacity.

Loan eligibility of an individual is based on their repayment capacity. An Individual’s repaying capacity is based on factors such as income, age, qualification, work experience, no of dependents, job profile, spouse’s income (in case of joint application), savings pattern, credit score etc.

<strong>Has the demographic changed in the last year or so or the type of property choices.</strong>

The pandemic has made people realize the importance of having their own house. The concept of work from home, education from home, entertainment from home has made people to move up the property ladder into larger homes.

We are seeing demand from working professionals and young couples amid the pandemic. The average age of a first-time home buyer in India is about 38-39 years.

Considering geographic trends, growth is coming from across the country including metro cities.

Builders have been shouting about excellent sales last six months - has that reflected in your loan sales

After the lockdown was lifted, both construction and sales of real estate projects picked up smartly across India. End user demand for homes has picked up significantly especially within the mid and affordable housing segments.

The demand for home loans continues to remain strong. For the quarter ended June 30, 2021, our individual loan disbursements grew by 181 percent over the corresponding 1st quarter of the previous year. July 2021 disbursements were the highest ever in a non-quarter end month. Growth in home loans came from both, the affordable housing segment as well as high-end properties. As at June 30, 2021, our assets under management stood at ₹5,74,136 crore as against ₹ 5,31,186 crore in the previous year.

Has interest for loans for warehouses, co-living spaces, co-working spaces been on the incline since the pandemic?

Most of the large or mid-sized well run companies have not given up their commercial premises. In fact, there’s a growing list of companies looking out for commercial space – largely from the IT and BFSI sectors and looking for large office premises across metro cities like Bengaluru, Hyderabad, Mumbai, Pune, etc.

With the e-commerce boom, there will be demand for warehousing. Co-living spaces have potential to grow and remains largely an untapped segment. Also with rising start up culture, demand for co-working space is also seeing growth.

Any other trends you see.

On the technology front, the pandemic strongly reiterated the need to embrace the ‘Digital’ bandwagon. In the housing finance space, we were the first ones to focus on online loan processing, which helped us during the lockdown. Our digital sourcing and appraisal models have enabled faster loan approvals to our customer. Today, 88% of our borrowers are on-boarded digitally, which is manifold times more than in the pre-COVID era.

Affordable housing will continue to be the driving force behind the real estate sector in India. The demand for affordable homes in India is extremely deep and resilient. With more developers transitioning to the mid and affordable segment by providing right sized, right priced units which are affordable for end users, the affordable residential real estate segment will continue to see strong traction.

What about affordable housing?

The government’s Pradhan Mantri Awas Yojana (PMAY) has been a growth accelerator programme with an aim to provide affordable housing the Economically Weaker Section (EWS), Low Income Group (LIG) and Mid Income Group (MIG). Under this scheme, the household income should not exceed Rs 3 lacs & Rs 6 lacs per annum for EWS and LIG category respectively and should be between Rs 6 lacs – Rs 12 lacs for MIG-1 category and between Rs 12 lacs – Rs 18 lacs for MIG-2 category. The schemes for MIG-1 and MIG-2 were valid up to March 31, 2021 and schemes for EWS/LIG are valid up to March 31, 2022.

HDFC remained amongst the top institutions in terms assisting the beneficiaries who have availed the CLSS scheme. HDFC was the first institution to cross two lacs beneficiaries under the CLSS in Sept 2020.

The government’s approach in order to take various housing schemes to real beneficiaries has been extremely proactive and commendable. As a result, there was seamless implementation of schemes even during the lockdown.

Because of favorable demographics, improved affordability, lowest ever interest rates on home loans in India, there will be a structural increase in the demand for housing and therefore housing loans.

RBI’s accommodative policy of providing of high liquidity has driven interest rates lower leading to the demand for real estate.

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Published on: Monday, October 25, 2021, 05:21 PM IST