Aditya Birla Group entering housing Finance

The $40 billion-plus diversified conglomerate Aditya Birla Group headed by Kumar Mangalam Birla has taken a major step forward in financial services with the license for its housing finance company coming through from the National Housing Bank (NHB).

The home finance foray is a major boost for the group which had drawn up big plans for a banking license but did not find itself in the list of two names cleared by the Reserve Bank of India (RBI) recently.

A spokesman for the Aditya Birla Financial Services Group (ABFSG) confirmed to Forbes India that the license from NHB had come in about a week ago and the group would now begin the execution of the business. The home finance business is expected to kick off operations in the third quarter of the current fiscal.

Sources said the home finance business was a perfect fit for the group and in keeping with its plans to grow its presence in the retail lending business. This will now allow ABFSG to offer home loans to its customers. ABFSG is already present across 500 cities in India and will initially offer its home loans in the top 30 cities.

ABFSG is currently present in various lines of business in the financial services space including life insurance, fund management, private equity, loans against property, SME loans, loans against shares, structured finance, general insurance broking, wealth management, stock broking and online money management.

The aggregate revenues of ABFSG as of March 31 2014 stood at Rs. 6,655 crore and its aggregate profit before tax was Rs 742 crore. ABFSG managed assets aggregating Rs 1,22,362 crore as of March 31.

Having gained healthy scale on the financial services business, the plan for the group now is to emerge as a one-stop for its customers' financing needs. "ABFSG intends to focus on product innovation and superior service to enhance its customer value proposition in this new segment," the spokesperson told Forbes India.

According to an ICRA study, the Indian mortgage market is currently dominated by big institutions like the State Bank Group, the HDFC Group, LIC Housing and ICICI Group which together accounted for 60 percent of the total market as at September 30, 2013. Recent reports have put the size of the Indian home finance market at Rs 9 lakh crore. But an NHB trend and progress report on housing in 2013 also shows that the penetration of housing is very low in India, with the housing to GDP ratio at just 9 percent, significantly lower than most emerging and advanced economies.

Though there is no independent confirmation of this, the Aditya Birla Group is also understood to be studying the recent draft norms for small banks and payment banks unveiled by RBI earlier this month very carefully. While a payment bank would be a good fit for the group too, given that it has telecom company Idea in its fold, a small, local feel bank is also something which can add heft to the financial services play of the group.

It is not yet clear how, if at all, the group will approach the two opportunities, though several players who did not get banking licenses in the first round feel that they still may get an opportunity in future rounds if licenses are given 'on tap.'

ING Vysya Bank Customers needs to look for another banker for getting Home Loan

ING Vysya Bank Stays away from Home Loan Segment

When most banks have switched focus on expanding their retail Housing Finance business to preserve asset quality in an uncertain economy, ING Vysya Bank appears to change the trend. The private sector lender has scaled down its incremental disbursal of home loans because of lower pricing and rising incidence of pre-payment.

“The difference in terms of pricing between home loan today and an average self-employed customer would be in the range of 150 to 200 basis points. So, that is one of the key reasons why the focus has to be more on loan against property compared to home loans... Secondly, on a commercial basis, because of higher incidence of foreclosure we decided to stay away from it (housing finance),” Mahesh Dayani, country head – retail assets at ING Vysya Bank, told analysts during a recent interaction.

While the bank has not exited the retail housing finance business, it is neither stepping up the incremental acquisition of home loan borrowers. In the first three months of this financial year, housing loans constituted only nine per cent of ING Vysya Bank's aggregate mortgage disbursals compared to 30 per cent in 2013-14 and 60 per cent in 2012-13. The share of home loans in the lender's mortgage book is now below 60 per cent compared to 90 per cent earlier.

This is in sharp contrast to the industry trend. At the end of June, 2014, while gross bank credit was up only 13 per cent from a year earlier, home loans increased by 17 per cent, the RBI data showed.

But with RBI waiving the pre-payment penalty on housing loans, ING Vysya Bank has decided to go slow on this business. “Last year if you would recollect, the foreclosure charges for a home loan were completely done away with. That saw a lot of foreclosures happening on the home loans. So, even if I board a customer at 10.50 per cent, it does not really guarantee that the customer is going to be sticky for the next seven to 10 years. The account could move out and we would continue to lose,” Dayani said.

The bank is now focusing on growing its loan against property business, where the pricing is relatively better. “We want to be in a segment, which we understand best. Self-employed segment is our core strength and they are primarily customers for loan against property. We will continue to scale down our home loan portfolio and grow the loan against property book as long as the pricing arbitrage remains in these two products,” Dayani told Business Standard.

He added that the delinquency rate is more or less similar for both these lending products. Loan against property now constitutes 91 per cent of ING Vysya Bank's incremental mortgage disbursal and is close to 10 per cent of the bank's retail advances.

Your Property documents mortgaged with Bank may not be Secured

LIC Housing Finance asked to pay Rs 2.3L for loss of documents

New Delhi District Consumer Disputes Redressal Forum has asked LIC Housing Finance Ltd to pay Rs 2.3 lakh compensation for loss of documents, due to imperfection in securing it properly in safe custody, submitted by Dr Mukesh  Kumar and Dr Renu Bala, residents of Delhi. 

The complainants had told the forum that they had taken a loan from LIC HFL for DDA flat allotted to him. Documents of fifth and final demand letter, payment challan and conveyance deed, were given in office of the company, for conversion from lease holder to free holder. Later they demanded back the letters deposited with company. The company, however, accepted that the conveyance deed was lost but it denied that other papers were supplied to it. It maintained its stand before the forum. 

The complainants had alleged that they had submitted three documents with the company-- fifth and final demand letter, payment challan and conveyance deed-- which were lost. Though the company was denying that other two documents were with it, the complainants from day one were reminding it to return the same.

However, at the stage all the three documents being not traceable by company, all it can do is to issue a certificate to the complainants, in pursuance to this decision to say that original conveyance deed of the particular property of complainants, was deposited by complainants with company and same has been lost by company. 

The forum had directed to pay Rs two lakhs as compensation to complainants for loss of conveyance deed... OP is directed to pay Rs 30,000 as litigation expenses and also directed the company to approach DDA for re-construction of a duplicate conveyance deed, with endorsement from the Registrar that original was registered with it and same was lost so that they are protected against fraudulent deals.