LIC Housing Finance, one of the prominent players in the Indian mortgage lending sector, has outlined a strategic shift to focus on the affordable housing segment. This move aims to accelerate loan growth and improve margins, signaling a departure from the lender’s traditional emphasis on salaried customers with strong credit scores.
Tribhuwan Adhikari, the Managing Director and Chief Executive of LIC Housing Finance, conveyed this strategic shift during a recent interaction with reporters. Historically, the mortgage lender has been more comfortable catering to salaried individuals and those with robust credit histories. However, recognizing the growing demand in the affordable housing space, LIC Housing Finance is now gearing up to tap into this segment more aggressively.
Adhikari stated that currently, affordable housing constitutes about 8-10% of the company’s portfolio. However, he anticipates this proportion to grow significantly over the next two years, aiming for it to reach 20-25% of the overall portfolio. Home loans up to ₹50 lakh fall under the category of affordable housing, and with increased emphasis, LIC Housing Finance intends to capture a larger share of this market.
As of December 31, the company’s outstanding loans stood at ₹2.8 trillion, reflecting a 5% growth compared to the same period the previous year. Adhikari explained that despite the relatively modest growth figure, the current financial year (FY24) has been focused on consolidation for LIC Housing Finance.
At the beginning of the financial year, the company underwent a significant technology upgrade and restructured its organizational framework. Adhikari highlighted that this transformation involved a shift to a new lending platform after using the previous one for nearly 13 years. While the old platform performed well, it faced constraints in adapting to new technologies. Recognizing the importance of digitalization, the company decided to invest in a more adaptable platform to align with future trends.
However, Adhikari acknowledged that the transition to the new platform had some performance issues, requiring almost four months to stabilize fully. Alongside the tech upgrade, LIC Housing Finance also restructured its operations by opening 44 cluster offices for credit appraisal, reflecting a strategic commitment to operational excellence.
Addressing the cautious approach adopted by the lender due to past bad loans and suboptimal decisions, Adhikari stated that the restructuring process aimed to instill prudence in the lending practices. The non-performing assets (NPAs) or bad loans of LIC Housing Finance, categorized as stage-three loans, stood at 4.26% of the loan book in Q3, a marginal improvement from 4.33% in the previous quarter.
Adhikari emphasized that the ongoing financial year has laid the groundwork for future growth, with FY25 expected to be a year of delivery for LIC Housing Finance. The company is optimistic about achieving a robust 15% growth in its loan book during FY25, signaling a renewed focus on expansion and market share capture.
LIC Housing Finance’s strategic shift toward affordable housing, coupled with organizational restructuring and technological upgrades, positions the company for sustained growth and competitiveness in India’s dynamic mortgage lending landscape. As the demand for affordable housing continues to rise, this move aligns with broader market trends and underscores LIC Housing Finance’s commitment to adaptability and innovation in the evolving financial landscape.