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The primary market, which is the developer market, is also seeing movement. Maybe in the second phase of the pandemic, people were going for finished properties. Now, we are beginning to see demand even in the primary properties for very good quality builders, says Shanti Ekambaram, President – Consumer Banking, Kotak Mahindra Bank.

Going into the festive season, what is the mood vis-a-vis the revival in the real estate market? Banks like yours and SBI are trying to woo people who take home loans and personal loans.
July and August data show that consumption is coming back very strongly and this is across all categories — home loans and consumer durables or personal loans. Suddenly discretionary buying as well as specific consumption is back. Given the confluence of demand for home loans and availability of real estate — consumers have started going for the price that the developers are offering and people have the need and the ability to buy a larger home across cities — we decided to lower home loan interest rate for the festive season starting from September 10 till November 8. That is a win-win for the customer. Of course, now it is the Shradh period, but then the festive season of navratri, Dussehra and Diwali will take place. People were conservative last year, especially following Covid. But as business sentiment improves, the customer business is doing well and the jobs market is improving. So, there is a little bit of a feel good factor and we are supporting our customers by helping them to invest well. Their consumption is our business and we are seeing them consuming.

Home loan rate is at 6.5% and linked to credit worthiness. So, a consumer with a good credit score gets a better rate. What is the strategy at play? It’s Shradh right now you and home sales won’t take place. So what is the strategy?
The cities are really seeing demand, whether it is Bengaluru, Hyderabad or Pune. There is a demand in the IT sector and there is a demand for hiring in the technology space. We are seeing a lot of companies come back to the job market. The salaried are certainly a big area of focus. It is a much easier segment to perform. Second, there is a very large home loan stock in the market, still at reasonable high prices. We are looking for quality customers. The primary market, which is the developer market, is also seeing movement. Maybe in the second phase of the pandemic, people were going for finished properties. Now, we are beginning to see demand even in the primary properties for very good quality builders.

We are also focusing on the primary market. We want to build this business and we believe in a separate way to build a long term book as well as get quality customers to help us do many more things with those customers, We have a full strategy of getting the salaried people, getting the balanced transfer market, the primary market and of course we continue to look at other segments. We are going full steam on the distribution, of partnerships with developers and we hope that the demand in the next 60 days, as the festival season goes on, along with this very attractive rate will spur customers to make that investment on new homes.

Could you slice up the home loan demand for us and tell us where exactly is it coming in, what the ticket size of the loans are and if they are more or less comparable to what we have seen in the past? Is there anything that is standing out to you in terms of the home loans and also are people switching to Kotak Bank?
We are seeing demand in the whole space. We are seeing demand at the Rs 40-50 lakh level, we are seeing demand at the Rs 75 lakh level, we are also seeing demand at the Rs 5 crore and Rs 10 crore. People are buying bigger homes and in the cities of Mumbai and Delhi, the ticket size is obviously higher. But in the other cities — be it Ahmedabad, Pune, Bengaluru and Hyderabad, particularly Chennai, to a certain extent it is at around Rs 40-50 lakh, right up to Rs 2 crore.

So we are seeing expansion in demand in the entire price range. This is because right from salaried to business customers, different segments are recovering and we can see a slow uptick in the economy.

The primary market actually is the most interesting one because that is relatively under construction projects. Just coming out of Covid, even the second wave, people are preferring fully completed apartments. Even now, 50% plus prefer fully completed projects. But we are beginning to see a revival and that is good for developers in the segments where they are launching new projects.

Tell us about the other consumer segments like auto and consumer loans. Auto and white goods sellers say while volumes are a concern because of supply side issues, the value of products being sold is actually going up because of pent-up demand. Is that something that you are witnessing on the advances side as well?
The answer is yes. Along with home, we also see demand for goods within the house from existing and new buyers. In July and August, we started seeing the consumer finance space pick up quite significantly. Typically August, from Independence Day, right up to the end of the festive season sees a big rise in consumer finance or consumer durable finance. We saw that play out.

Interestingly, we saw it play out in July as well. It started in July. It picked up steam in August and for the Shraddha period in between, we will see a very good uptick. People are going in for better value and better products because maybe even work from home makes them want to have a better set up.

There is a demand for goods right across — whether it is laptops, washing machines, dishwashers or large format TVs, there is just a demand for a lot of goods and we have seen that uptick. So consumer finance has also started picking up and is a very interesting space.

Similarly personal loan which was a little muted has started picking up. I call it the consumption theme. Consumption has started and think there are many factors linked to it. Apart from just the job market, the general capital markets have been doing well. People have probably been making money, and the demand for consumption has started. That is a very interesting thing for retail financials particularly.

You are clearly targeting the good quality borrowers and that is why you are linking your rate with that score. How does that exactly work?
For the 6.5% home loan rate, we link it to credit score and by the way other banks have done it also. If you remember the corporate sector, the prime borrower rate is for prime customers. In the retail segment, a prime is what you call a score. The better your score, the better is the rate but it does not mean that you do not underwrite less than prime borrowers. There is an acceptable range of borrowers and we are not just going after that segment. We have a range of customers that we target and we structure those credits.

We are seeing demand from all kinds of segments but the prime rate is for the prime borrowers. Having said that, the differentials are not very much in the home loan industry, maybe 10 bps, 15 bps whatever. But we are seeing demand from right across the segment. We are seeing reasonably good credit flow across the customer segments.

The credit card market share of your bank is still low in relative terms. Are you looking at increasing the market share in this division? There are a couple of companies on the block as well.
The last two months have seen very strong spends by customers. The credit card business also grew after low spends by customers last year. We have seen a strong uptick in credit card spends. In the last 12 months we have done two big things. One we have actually introduced four new products in terms of making sure that we have the right product for the right customer right from the basic to the premium segment.

We have also upgraded our technology stack to the best in class. In the last two months, our credit card business has been growing month on month. This is a business we certainly intended to grow. We are ready for an uptick in the business.

The banking industry faced some issues in the retail MSME space due to Covid pressure placed on finances of individual borrowers. What is the approach in terms of quality for you in the near term? Will you continue to be cautious and are you sanguine about the quality of your book?
Covid has seen customers who were borderline in margin, facing trouble in the once in a century event. The quality of customers is far better. Also the collections data of the bank, the current demand efficiencies even during the second wave continue to remain good. The incremental quality of credit is reasonably good and so that is a good base to grow. MSME as a segment held out right through, thanks to the government’s liquidity scheme through ECLGS and it helped the customers during that time.

Take sector after sector, except for those badly hit by Covid which is travel and to a certain extent restaurants and pubs, etc, and hotel industry — most of the segments have bounced back and MSMEs are picking up the same demand and putting up capex. So the MSMEs thanks to the government’s initiatives, held a lot better in this period than the individual and the borderline cases.