The individual loan book growth on AUM basis was 17%. Last year, we have sold much more loans aggregating to ?25,150 crore compared to ?6,453 crore in FY18. Due to certain clarifications that were sought on the GST matter, these loans could not be sold during the year ended April 2018. The loan growth would have been 24% if you add back these loans.
Now, public sector banks are getting back in shape. Do you expect growth in the individual segment to sustain?
Structurally, demand for housing will be strong in India for a variety of reasons. Housing is more affordable than what it used to be. Income levels have been rising every year and property prices have remained the same in 3-4 years. The penetration level of housing is low at 10% to the GDP compared with USA which is 63%, China 22%. Thirdly, average age of the first-time buyer is 38-39 years. With two-thirds of the population below 38 years, there will be demand for housing. All the initiatives that the government has taken in terms of fiscal benefits, tax benefits and subsidies will encourage people to buy homes. The government is taking steps to provide thrust to economic growth. Housing creates a lot of jobs. It supports some of the core sectors in the economy like cement, steel, power and many ancillary industries associated with housing.
Loans to non-individuals comprise 26% share. How are you de-risking the portfolio especially the corporate loan book where stress is building up?
If you look at the split of our loans, 74% is to individuals, 9% to lease rental discounting. Between these two, 83% of the book is fully covered. Out of the remaining 17%, 12% is to construction finance and 5% to corporate, which is declining year after year. We cannot de-risk corporate loans completely. What we can do is make more and more provisions. We carry a provision today, which is higher today than what we are required to. We carry a provision of ?5,880 crore. If we go by regulatory requirement, we need to make provisions of ?3,220 crore. We can de-risk the balance sheet by taking higher provisioning and by not taking too much risk at times when there is stress in the system. If you look at incremental lending this year, 85% of the loans have been to individuals and 10% to lease rental discounting, which do not carry any risk. You are left with 5%, where there could be any risk.
What needs to be done in order to bring the real estate sector out of stress?
There is stress in the real estate market in India. This is largely in big cities and slightly for expensive properties. The stress is more because of the liquidity issue that NBFCs faced in October-November. Money that developers would generally get from NBFCs and housing finance companies (HFCs) has not been forthcoming. Second, sales of real estate properties have slowed. The reason why developers used to say property sales have fallen is GST. The rates have been lowered from 12% to 5% since April. We hope that there is pick up in sales in the couple of months. Also, a nudge from the government to banks that lending money to real estate is something that they should look at doing is important. That will help developers come out of credit problems.
What is your outlook on property prices?
Structurally, the demand will remain. India is a large country. In places where there is no oversupply, we could see property prices inching up over a period of time with inflation.
Are you looking at listing any of your subsidiaries HDFC Ergo or Credila this year?
There is no plans of listing both HDFC Ergo, the general insurance company as well as Credila which is an education finance company. It may happen over the medium term. We are looking at organic or inorganic growth in health insurance.