DHFL has set aside a sum of Rs 100 crore to invest in various start ups so that the company could be future ready, said Kapil Wadhawan, chairman, DHFL group. Wadhawan said the company would welcome any start-ups which can help improve its processes. Edited excerpts
Has demonetisation turned out to be a damp squib?
Demonetisation came as a surprise. It was a bold move, not seen before. The public was inconvenienced. In the long run, it will turn out to be extremely positive. The formal-money economy is providing a lot support to home buyers and developers.
Will cash become a thing of the past in real estate transactions?
We all know the cash component in land transactions has been an old reality of our economy. We also know about cash deals in real estate transactions. But in the past few years, we have seen a dramatically different approach towards financing. Financial institutions are there to facilitate house buyers. Formal financing to support large developers community was never there before. Money is available across categories including private equity, debt money and Alternative Investment Fund management structure. We will go a long way in ensuring whatever black money exists or existed in the real estate space is done away with.
How do you propose to grow in the wake of demonetisation?
We are in a fairly dynamic environment. For us, it is an opportunity to grow. We want to be future-ready.We are making investment in technology, start-up businesses. As an institution, we are making small investments in various start-ups, from which DHFL can benefit. We have set aside a sum about Rs.100 crore for the purpose. We are hiring good talent. We will continue to build a strong engine for business origination. I am bullish on digital and startup opportunities. We want to be the largest originator of housing loan in the country in the next three to five years. Any start-ups which can help improve our processes are welcome.
Do you see any opportunity for HFCs because of demonetisation?
Yes. We are in a housing-deficit country. About 40 million unit housing shortfall is a well-known fact. Mortgage-to-GDP ratio is extremely low -about 8-8.5% compared to its peers: 17% for Thailand, 20% for China, 34% for Malaysia. We have a long way to go. Whether demonetisation happens or not, such opportunities do exist.
Why has affordable housing not yet become a full reality?
The main reason for this is that one rarely talks of housing in isolation; the reference is usually to real estate. Real estate consists broadly of four sub-categories, of which housing in just one component. The other three are retail, commercial and hospitality. The housing sector deserves special attention because a vibrant housing sector is a reflection of an economy’s good health. The recent ‘Housing for All’ scheme reflects the government’s true vision not seen before. Home ownership is sensitive to people’s long-term aspirations. The government has been pushing for it.
What do you expect from Budget?
I expect an extremely popular Budget. I expect a Budget, which caters not only to retail investors, borrowers on the financing side but also supports the agri economy.
I also see the success of demonetisation. Prime Minister Narendra Modi was categorical in his speech. Infrastructure is the need of the hour. We could see some respite in corporate tax rates and sops for the housing sector, which is clearly the government’s priority. There have been challenges in the agri economy and the SME sector. It takes time to fill the gap again. But we had good monsoon. A lot of money is in the hands of people due to Pay Commission. Interest rates are falling. Now, they are in single digit.
Are you open to inorganic growth in your MF insurance businesses?
We have always been open to inorganic growth across our businesses. In the housing-finance space, we made two acquisitions. In the life-insurance space, we did not start a greenfield project.
In the asset-management business as well, we bought a 50% stake from Pramerica and become a joint venture partner with them. Depending on what opportunity lies, we are open to evaluate. We bought Deutsche’s asset management schemes. We are currently managing about Rs.27,000 crore of AUM, predominantly debt. We are increasing the equity component as well. Our organic growth will continue but anything that is inorganic in nature and helps us build a strong AUM position in the market, we will be very happy to do so.
Will you acquire or be acquired?
We are looking at an opportunity for growth. Either we are approached or we approach someone, at an appropriate time, our friends in the media will know. We are open to evaluating opportunities in both areas: life insurance and asset-management business.
Credits ET Realty