The Hindu Business Line : Mixed feeling for housing finance cos

THE counters of housing finance companies today had mixed impact of the Credit Policy announcement. While the companies with no access to foreign currency funds dipped, the others with such access moved up.

The Dewan Housing stock moved down 3.11 per cent and Gruh Finance fell 1.82 per cent. However, LIC Housing Finance shed 4.62 per cent, the highest in the sector.

Mr Kapil Wadhawan, Managing Director of Dewan Housing, told Business Line that he saw a general pressure on the spread for the housing companies in the coming two quarters. "We have to lower the cost of finance," he added but did not elaborate how. The company has completed rights issue in January last to raise a total of Rs 50.11 crore.

However, Mr Wadhawan was confident that the company would maintain its 30-35 per topline growth in the current fiscal.

According to Mr Rrajesh Agarwal of CD Equisearch, HFCs are likely to float in the medium to long term on high growth rate in the real estate sector.

Though HDFC and LIC Housing Finance dominate the housing loan market, Dewan Housing Finance Corporation is recognised as the second largest private housing finance company in terms of loan portfolio (Rs 9,900 crore).

The company was the first to bring in the concept of dual protection by way of accident risk cover and property insurance, free of cost to the borrowers along with the housing loan.

Couple of days back NHB raised the refinance rates for HFCs by 25 basis points from 6.50 per cent to 6.75 per cent. This is the second time in a little over four months that NHB has hiked the rate of interest on refinance.

Most housing finance companies (there are 32 in the country) seek refinance from NHB. In fact, a large percentage of the liability portfolio of HFCs is in the form of refinance from NHB.

"This implies that HFCs will either have to contain their spread or pass on the additional burden to the customers. This is going to affect the bottomline of the HFCs. The total refinance extended by NHB has risen to Rs 5,200 crore for the nine-month period from June '04- March '05 against Rs 1,035 crore in the corresponding period last year", according to Mr Darshan Mankad of Anagram Stockbroking.

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