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Mumbai, Oct. 21 LIC Housing Finance Ltd reported a 16 per cent increase in net profit at Rs 135.06 crore for the second quarter ended September 30, 2008, against Rs 116.37 crore in the year ago period.

The profit would have been higher but for the high interest cost, said Mr R.R. Nair, the company’s Director and CEO. “Our interest cost has gone up by 41 per cent, but we have decided not to pass on the entire burden to our customers. This is because nearly 95 per cent of our portfolio consists of individual borrowers,” he said.

The net interest margin of LIC Housing dropped to 2.92 per cent from 3.2 per cent in the year ago period. “We have raised our interest only by 125 basis points as against around 400 basis points increase in interest rates, generally”, Mr Nair said.

The total income for the quarter rose to Rs 704 crore from Rs 523 crore.

“We have not seen any slowdown in ‘genuine’ demand for housing loans. There may be some drop in investor demands and that is unlikely to affect our business” he said. With the softening in interest rates now, the company expects to report better result in the next quarter.

The current liquidity crunch has not affected LIC Housing. “The support of the parent LIC and our “AAA” rating have enabled us to raise enough funds.’ He said

Disbursements of loans during the period increased by 35 per cent. The number of fresh applications for loans cleared during the six months gone up by 20 per cent.

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