Revisit sops for loans to push housing sector growth: Khara at BS IMLC

Pointing to economic spinoffs, such as creating jobs, Dinesh Khara, chairman, says it's time to revisit tax benefits for loans

State Bank of India (SBI), the country’s largest lender, is confident of healthy growth in mortgage loans on the back of improved underwriting, digitising land records, and a reduced response time. Pointing to economic spinoffs, such as creating jobs, Dinesh Khara, the bank’s chairman, tells Tamal Bandyopadhyay, consulting editor, Business Standard, it’s time to revisit tax benefits for loans. Edited excerpts:

I was your home loan customer in 2016 and remember it took a month to get the loan. Around the same time, India’s largest private bank was talking about giving it in a few days. Now, I understand SBI is as nimble as some private-sector peers. Processing time has dramatically improved. Can you take us through?

We started housing loans in our portfolio in a mean-ingful manner from the year 2000. Branches used to sanction the loans but, for all practical purposes, from 2011 onwards, we significantly centralised the processes.

What does this mean?

We used to have 150-odd centres, from where we processed housing loans for 20,000-plus branches. Today, we have 400 centres across the country. The process is centralised in terms of sanctioning, disbursement, and documentation.

Today, we have come to a stage where the average time taken to sanction a home loan is eight days. The average time has to keep in mind the kind of processes required, such as verifying the documents, title deeds, etc., and obtaining reports on those title deeds. Now more than 50,000 applications are processed every month at these centres.

Your last annual report that shows you have 390 centres and plan to add 150 this year (FY24). In your tenure as chairman, how many more would you like to add?

Last year, the bank added 150. We are assessing the requirements and are open to adding many more. We have come to a stage where digital documentation too is being facilitated. These are long-term loans.  On average, the duration of a home loan on the books is 7-10 years, depending upon the areas. We have to focus on these because title deeds are kept with us. We should be in a position to return them when the loan is repaid. 

Beyond loan processing, a micro aspect, at macro level housing and construction activities create employment and give a fillip to the economy. How do we approach this?

The formalisation of the economy has helped this sector to grow. The kind of challenges that financiers face essentially relates to the digitisation of title records. Many states have done it.

Then, there are always efforts on the part of any lender to look at EMIs (equated monthly instalments) and ratios so that the borrower is not overly leveraged.

In the formal sector there are not many challenges. But in the informal sector, there are. That is one of the reasons why perhaps housing finance companies are in a position to take a call on imperfect documents, inadequacy of title deeds, etc. The Real Estate Regulatory Authority (Rera) has brought in discipline in this sector.

Given the aim of housing for all, what needs to be done?

When it comes to housing for all, government initiatives such as the Pradhan Mantri Awas Yojana (PMAY) have gone a long way to make it a reality for many.

The other model we saw is Singapore. Almost 80 per cent of land ownership there is with the government. It can decide where and what should come up. That gives clear visibility on title deeds.

Rera has brought in transparency in the activities of developers. But is there any scope for fiscal and tax incentives to lift the sector?

Much of it will depend on how the government looks at the final Budget. But I feel there could be scope for giving incentives so that homeowners are encouraged. House rent allowance and the rent paid are deductible from income for tax purposes but as far as home-loan instalments and interest on home loans are concerned, the matter can be revisited.

Risk assessment and underwriting are playing a critical role in the mortgage market. People say that the country’s largest bank —  the elephant — is dancing. Is it to the tune of artificial intelligence and analytics?

We have started leveraging our database. It was a static database for many years. Now, we have created various algorithms and the bank is running them on a database. This helps us in honing risk management practices and identifying potential customers whom we should reach out to. On top of it, that helps us in offering customers what they are looking for.

Analytics is one of the levers in terms of marketing, risk management, identify-ing markets, and improving customer experience.

Will the Indian mortgage market see some disruptions? Can we expect some innovations by SBI in the mortgage market?

The increasing credibility of land records and certainty of income streams will boost confidence. Nowadays, we are evaluating the credit scores of borrowers because those capture the unstructured pieces well. If borrowers have credit scores, we are extending to them interest-rate benefits also.

The average duration of home loans is about eight years. So, we are encouraging people to go for a second home loan. We are also encouraging people to upgrade their homes.