Srinivas Acharya, Managing Director of Sundaram BNP Paribas Home Finance Ltd., has asserted that the rising interest rate will not be a deterrent for any home buyer who genuinely seeks to own it. According to him, the hardening interest rate will only impact the decision of buyers who are speculative investors.
In an interaction with this correspondent here on Monday, Mr. Acharya felt that interest rate was one among the many instruments to contain inflation. Quoting Y. V. Reddy, former Governor of the Reserve Bank of India, he said the interest rate “cannot remain perennially at the current level”. He said he fully agreed with Mr. Reddy who had suggested that past increases in interest rate had not been fully transmitted to the economy.
Mr. Acharya said that “there are pockets of liquidity sitting in the market”. He said that “liquidity pockets will, in fact, expand”. The Government, he felt, would have to soon shift its focus to supply-side management to control inflation. He felt that the interest rate would have to head lower. This could happen in the next three quarters or so. The managing director said house owners as a percentage of total population remained in single digit in India.
Mr. Acharya said Sundaram BNP Paribas Home Finance would rapidly scale up to reach a disbursal level of Rs. 3,000 crore a year. For the current financial year, the company had set a disbursal target of Rs.1,800 crore. Last year, it disbursed loans worth Rs.1,210 crore. Currently the company had 51 offices in the South. This number would go up to 70 by the end of this financial year.
Acknowledging the support of its Indian parent, Sundaram Finance, he said the in-house legal and technical teams kept the company in good stead in the home finance market. Elaborating the pan-India aspiration, Mr. Acharya said Sundaram Home would adopt ‘seeding approach' to establish its presence across the country.
He said the company had not set any target for securitisation. Last year, it did, however, securitise loans worth Rs.125 crore. “We might do (securitisation) Rs.125- 200 crore this year,” he added. He said securitisation helped beef up capital adequacy ratio. “When you do securitisation, the portfolio gets rate. Once you do the rating, it becomes an ongoing exercise,” he said. This helped Sundaram Home “to get noticed in the debt market and negotiate for better rates,” he added. The company, he said, made a one-time provision of Rs.9.94 crore on teaser loans as mandated by the Reserve Bank of India. Sundaram Home, had appealed to National Housing Bank (NHB) to treat this provisioning arising out of teaser loans as Tier-2 capital. “We have not heard anything from NHB,” he added. Notwithstanding this provision, the company made a profit after tax of Rs.48 crore. The average cost of funds stood at 9.3 per cent. The fund sources included term loans, NCDs (non-convertible debentures, NHB finance and public deposits. A third of its funds came from NHB refinance. Sundaram Home had public deposits worth around Rs.525 crore. While the yield stood at 12.6 per cent, the net margin for the company stood at around 2.25 per cent.
Mr. Acharya said Sundaram Home won't require any fresh funds for this year. “We may ask for some money next year,” he, however, said. Any fresh funds from partners would come only in the form of equity infusion, he said.