homereal estate NewsRise in affordability aiding urban residential realty; expect spreads to remain stable: Keki Mistry
Rise in affordability aiding urban residential realty; expect spreads to remain stable: Keki Mistry
In an interview with CNBC-TV18, Keki Mistry, vice-chairman and managing director of Housing Development Finance Corporation (HDFC) Limited, said, that the residential realty market in urban areas has improved significantly due to a rise in affordability. He also mentioned that the real estate cycle has changed over a period of time. Mistry highlighted that spreads have remained the same for the company despite interest rate cycles and going ahead, he is confident that spreads will remain stable.
The residential real estate sector has been rather buoyant due to comparatively lower prices and interest rates. In an interview with CNBC-TV18, Keki Mistry, vice-chairman and managing director of Housing Development Finance Corporation (HDFC) Limited, affirmed that the residential realty market in urban areas has improved significantly due to a rise in affordability. He also mentioned that the real estate cycle has changed over a period of time.
"The real estate cycle has changed and it has changed in a significant manner and it's not just in the last six months, it's been there for more than a year now. Affordability has improved significantly and this is by virtue of the fact that between 2018 and 2019, property prices didn't move up, but income levels consistently kept rising and therefore housing has become a lot more affordable today than what it used to be in the past," he said.
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Highlighting the demand scenario, Mistry explained that he is seeing it across metros and non-metros over geographies. He explained that demand is prevalent both in affordable as well as high-end markets. He expects this growth to sustain for a long time ahead. Elaborating further, he said that individual loan growth for the company has been faster than the industry.
"The structural demand that we believe we will continue seeing in India, has pushed the growth and we see this across the board. We see this in metros, we see this in non-metros. So earlier, the engine was really firing from the non-metros, now it is coming from all over the country," he explained.
"The growth was very strong and we continue seeing that momentum post the close of the quarter. I don't want to get into numbers, but the growth momentum has continued unabated. And my sense is the way things look now, it should continue for a very long time," Mistry added.
On individual loans, he said, "Individual loan book increased by 16 percent year-on-year (YoY) as of December, and if you go by the RBI numbers, the growth of housing loans in the banking system was 9.3 percent. So clearly, we have grown a lot faster than other players by and large."
Mistry highlighted that spreads have remained the same for the company despite interest rate cycles and going ahead, he is confident that spreads will remain stable.
"We have lived through various periods of time over the last so many years where interest rates have gone up and have come down and if you see, our spreads have always remained stable. So, I don't believe that there will be any impact on margins or on spreads either positively or negatively if interest rates go up. So my sense is spreads would remain stable," he said.
On credit cost, he said that it will come down. He expects it to revert to 50-70 basis points (bps) over the next few years.
"My sense would be that over the next two-three years, you should see credit cost revert back to the levels that used to prevail pre 2017-2018, which was around 15-20 bps, whereas at this moment for the current year, the annualized credit cost is 35 bps and last year was a little over 30 bps. So that number will keep declining," he said.
Watch the video for the full interview.
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(Edited by : Dipikka Ghosh)
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