Encounter

Y P Gupta, CEO, talks about LICHFC's new strategies: more loans to the corporate sector and lower rates offset by higher volumes.

Recently, a number of housing finance companies slashed rates on individual loans. LIC Housing Finance (LICHFC) has cut rates on individual loans by 0.25 per cent to 0.5 per cent. Says Y P Gupta, chief executive of LIC Housing Finance: LICHFC is all set to explore new areas including loans to be given to public sector undertakings and the corporate sector for their employees' housing needs.

In 1997-98, LICHFC's total loan disbursal is aimed at Rs 850 crore. For 1996-97, the loan disbursal was Rs 739 crore and this year's additional volume is expected to be generated through the loans given to the corporate sector.

 

The housing finance company is opting for direct marketing approach for this purpose. While LIC agents are the intermediaries for individual loans,for corporate and public sector loans LIC will be creating ten teams all over the country to make presentations and seek loans for the housing needs of the corporate sector.

According to the chief executive, 65 per cent of LICHFC's portfolio belongs to the Rs 1.5 lakh to Rs 3 lakh loan category. With the cut in rates, there will naturally be some effect on the spreads of most of the housing finance companies (HFCs) as the cost of funds has not gone down. Says Gupta:For LICHFC, the impact on cumulative spreads will be marginal for two reasons. One is that the lower rates will apply only to incremental loans. Two, volumes are expected to go up as interest rates decrease, given the demand for housing finance. Moreover, when interest rates in general are falling, housing finance companies cannot remain untouched, says he.