Bangalore January 3rd, 2014: Builders must get into affordable housing projects more, as this is where the next wave of growth lies, according to Sunita Sharma, Managing Director and CEO, LIC Housing Finance.
In an interview with Business Line, the company’s first woman chief speaks about why the housing finance company merits a banking licence and what will drive growth for the company in the next few years.
Sharma insists that while growth is important, growth with profitability is paramount.
Edited excerpts from the interview:
At LIC Housing Finance, what will be your focus for the next few years?
The company has been growing at a good 20 per cent every year for the last few years.
Our focus would be to have growth with profitability and margin generation.
For this we will have to look at our distribution channel. We have 10,000 agents on the field.
We will like to increase that. We want our agents to reach different segments of the society. We want to increase the strength of distribution agents by 18-20 per cent every year.
We also want to enhance growth by taking care of asset quality.
If we have good asset quality, NPAs (non-performing assets) will be low, and then definitely margins will improve further.
We would not like to lower our asset quality (standard) at any cost.
Secondly, we will continue with our strategy of focussing on the middle-income group because we feel that is the biggest segment that is going to grow.
What is your average loan size? Why is the middle-income segment so important for your company?
Our average loan size is Rs 18-19 lakh, we give 60 per cent of the value of the house as loan.
In the middle-income segment, we lend to the salaried class — mostly people working for the Government and public sector enterprises.
We feel that an economic slowdown does not affect their ability to repay their instalments.
Hence, our focus on this segment helps us retain our asset quality.
Given the stress in the economy, what are the precautions you are taking to give loans to the right people?
First of all, we have a good credit appraisal system in place.
We have a system where the person who markets the proposal does not disburse loans. There is a front/area office which markets the proposal.
A separate person in the back-office appraises the proposal. On that basis, another person disburses the loan. So, there are three checks and balances.
This, itself ensures the quality of the loan.
Why do you think LIC Housing Finance deserves a banking licence?
We should get a licence because in the last 25 years we have done a good job. Our customers trust us as we follow transparent policies.
From a regulatory viewpoint, we have been a very good corporate citizen. We are very strong financially. Also, we have been able to distribute loans to a large segment of the society.
There is a lot of talk about affordable housing. Do you think enough is being done to promote affordable housing?
Yes it is happening, but the volumes are not as much as one would like them to be.
It would do a lot of good for builders if they get into the affordable housing segment as there is a lot of volume in that segment.
Also, the regulator is coming out with various schemes for this segment and we feel this will benefit both the buyer and the builder.Business Line