LIC Housing Finance which claimed to have extended housing loans to over 8,00,000 customers by far is expected to see a marked expansion in its profitability as dual-rate home loans come up for re-pricing at higher rates this fiscal year.
V.K.Sharma, Director and Chief Executive of LIC Housing Finance Limited who was in Chandigarh today to inaugurate a Back Office here to cater to burgeoning market this side told that “at present the ratio of fixed interest rate to floating interest rate was 60:40”. He told that "Back Office would help to improve loan sanctioning process and services in the northern states of Punjab, Haryana, and Himachal Pradesh, which was by now looked after Delhi office. The Back Office would facilitate providing long term finance to individuals for purchase, construction, repair and renovation of houses and flats".
It is learnt that the LIC Housing Finance has about Rs. 10,000-12,000 crore worth of loans coming up for re-pricing at higher interest rates under its Fix-o-Floaty scheme in financial year 2013.
Sharma said that “all that a housing loan borrower expected was that for first couple of years equated monthly instalment (EMI) does not change. Any change thereafter, did not matter much”. Enquiries reveal that most of the loans have an average fixed rate at 8.89 per cent and are likely to get re-priced at about 11.9 per cent. This suggests strong benefits to its profitability, given that its funding costs have been controlled. It is a fact that a number of lenders have over the past few years launched such schemes as a means to draw in more borrowers. Home buyers are offered a lower fixed interest rate, or a so-called ‘teaser’ rate, for the first few years – typically three – after which they have to switch to a floating, or market-linked, rate.
Sharma told that in all “LIC Housing Finance Limited has lent housing loans to 8 lakh accounts of which about 7 lakh were individual accounts and of these 2 lakh were women”. He hoped that there would be some correction in the range of 10 to 15 per cent in real estate sector.
About Chandigarh market, V.K.Sharma said that entire north was important for the company as it accounted for 17 per cent of total business for the company. He said that Chandigarh had fair amount of self employed segment and the company was planning