Despite the presence of big financial institutions and banks, housing finance companies (HFCs) have performed incredibly well, in reaching out to needy home buyers. In an exclusive interview with Housing.com News, Ramratthinam S, CEO of Muthoot Homefin (India) Ltd, answers some of the important questions that home buyers have in mind, when they approach a HFC for a home loan.
Q: How do housing finance companies benefit the real estate market and home seekers?
A: Housing finance companies focus on home loan and related products. Home buyers, who are willing to buy a home from the developer, as well as those looking at the resale market, can approach HFCs. Home owners who want to renovate their homes, can also get a loan for renovation or avail of a home extension loan. HFCs are regulated by the National Housing Bank (NHB). HFCs know the realty market better and they deliver more customised products. Moreover the process of obtaining a loan is shorter, in the case of HFCs, as compared to banks.
Q: How do HFCs differ from banks, in terms of services, product delivery and quality?
A: HFCs are more closely associated with the realty market. Hence, they understand the requirements of home buyers better and their service quality is very good. Customers can get most services at their doorstep. In case of banks, they also have several other products and therefore, you cannot expect their personnel to visit the customers’ doorsteps, to deliver services.
Q: Why should a home loan seeker turn to an HFC, instead of a bank?
A: The interest rates on home loans offered by HFCs, are normally at the same level at which banks offer home loans. However, loan eligibility norms are more flexible, in case of HFCs. So, you may get more of a loan amount from HFCs with the same income level, than what a bank may offer you. HFCs also offer loans to customers who do not file the income tax returns, such as taxi drivers, vegetable vendors, etc., depending on the fulfilment of the eligibility criteria. Moreover, HFCs tend to pre-approve builders for housing projects. Therefore, the loan processing time is likely to be shorter. One-to-one service by the HFCs to their customers, is yet another reason to select it over banks.
Q: Where do you see interest rates heading, over the next six months?
A: In the current scenario, interest rates are expected to remain stable. Between six and nine months from now, there could be some downward revision, but it depends on the market situation and the political situation at that time.
Q: What are the key challenges faced by HFCs in the near term and how they are preparing for it?
A: Raising funds is one of the key challenges faced by HFCs. 50-60 per cent of a HFC’s borrowing, is normally from banks and the banks look at this exposure, under the umbrella of real estate. Handling liability is another challenge. Lack of supply in the realty market is also a big challenge, because there is good demand but if the supply side is poor, then, loan offtake will also remain subdued.
Q: What are the factors that will drive the growth of HFCs in the next five years?
A: The government’s ‘Housing for All‘ initiative, is expected to boost the demand for home loans in the near future. A significant portion of the home loan demand, is expected to come from the sub-Rs 50 lakhs segment. Improvement in real estate supply, will result in better performance by the HFCs.