Excerpts from an interview.
How has internet helped the growth of your industry? Has it changed the way you do business?
I feel the impact has been in the arena of enquiries from Internet users. We have found the internet a good medium for publicising our rates and plans for home loans. Our experience teaches us that it is a cost effective medium to reach the NRIs.
Do you see a downward revision in interest rates for home loans?
I see a 1 to 2 per cent cut in interest rates in the next three-four years. And perhaps in the future, rates may stabilise. We have seen a steep fall from 13 per cent to 8 per cent. But such a steep fall cannot be expected in the future.
Why this sudden rush into home loan financing? Most banks have jumped into the bandwagon...
The reasons are two-fold. On the one hand there is a scarcity of good corporate borrowers, and this has led many banks to look towards home loans. Moreover funds deployed in this segment are relatively secure. Demand too is high forcing lenders to take more than ordinary interest. The growth rates were as high as 30 per cent over the last few years. The trend is not only for new homes but also for investment in homes. Consumers are price conscious as research reveals that 92 per cent of the people look at the EMIs to choose a home loan provider.
Where are you getting the new customers from? The market appears overcrowded.
The non-metros are the growing segments for home finance. We are present there. Banks, though they are present in the small towns, don't seem to push hard in the segment. We have gone into the segment with mobile vans in cities like Tiruchirapalli and Madurai. Two more mobile vans are in the offing.
High stamp duty and urban land ceiling are acting as a dampener for an expanding home loan market. How are you going to solve the problem?
We feel that there is a need to reduce the stamp duty
to a reasonable 5% in states that has not implemented this . This would
lead to increase secondary sales of houses and also encourage home
ownership.
What are your expansion plans in other states. You are being seen as a Tamil Nadu centric company?
We are strong in Tamil Nadu, it is also due to
the
brand image that the Sundaram commands. we have set up operations in Andhra
pradesh, Karnataka and Kerala and penetrating aggressively in samller towns
in South India.
There is tremendous competition in the home loan segment. What are the trends?
There is going to be a shakeout in the segment. The small players are leaving the market. Some of the banks may in due course decide that it is not worthwhile to continue. As far as the securitisation of the market is concerned, we propose to securitise Rs.100 crores worth of loans. We plan to do more in the future. As for the secondary market for securitisation, there is not much of a movement. We expect the secondary debt instruments to be traded on the National stock exchange. But it would take time.
What's your vision for the company?
We plan to approve loans to the tune of Rs.1000 crores in the financial
year 2004- 2005 and disburse Rs.750 crores.
-K Venkatesh
