PNB Housing Finance, the country’s fifth-largest housing finance company, may go for an initial public offering (IPO) in mid-2017, according to a top official.
“I will be frank, we have to raise capital. Probably in the coming financial year, in the middle of the year, we should be going to the market. We are now large, it makes no sense to remain a private limited company,” Sanjaya Gupta, Managing Director, PNB Housing Finance, told The Hindu .
The company is betting on the robust growth in its lending portfolio from Tier-2 and Tier-3 cities and affordable housing segment in metropolitan cities.
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While the realty sector is facing a slump at macro-level, Mr. Gupta said the mass housing segment is still doing well.
“Our bread and butter is the mass section of society where housing is a necessity, not a luxury. Mass housing does not mean the entire lower segment but where the most of our demography lies. If you are talking about Delhi NCR, then you are talking about the range of Rs. 65-Rs.80 lakh flats that are selling,” he said. The more expensive property sales are lower due to ‘sentiment.’
“Public spending will have to come to the forefront to boost the sentiment of our people to once again start transacting,” Mr. Gupta said.
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This investment must come mainly in infrastructure, roads, logistics, railways and warehousing.
While the metros account for the bulk of the housing finance business, growth was coming from the smaller cities, he said.
“It is very true that the six big cities in the country give more than 60 per cent of the business but the growth rate is coming from Tier-II and Tier-III cities. That is our focus, to reach out to these cities.”
The housing sector is at a sweet spot for customers, according to Mr.Gupta, who said “now is the best time to buy a house.”
“Speaking as a consumer, this is the right time to buy a house. The menu card is long, there are so many properties available at different sizes, locations and price points. I bought my own house recently and I had been looking around for two years,” he said.
The Finance Minister, in his Budget, must incentivise states to reduce the stamp duty on property to improve sentiment and spur sales.
“If we know that the construction sector is one that can augment the sentiment of the economy, then there should be direct incentives in the sector. Why are stamp duties so high even now? The union finance minister must give grants to states to make up for the difference in state revenue if the state reduces the stamp duty,” Mr. Gupta said.
The state governments must realise that the increase in volumes will make up for most of the difference (due to lower stamp duties) anyway, he added.
“On the one side, the Prime Minister is saying that he will give a subsidy of 6.5 per cent for loans of up to Rs. six lakh for housing. On the other side, you nullify this entire subsidy by taking a higher stamp duty,” Mr. Gupta said.
Mr. Gupta also suggested a portion of the registered value of a property be deductible from the owner’s tax burden.
“If you were to allow people to offset 20-25 per cent of the registered value of property against their tax burden, it will incentivise them to disclose more transactions,” he said.