Home loan firms raise debt as disbursals rise

Demand for funds in the last quarter of the fiscal to meet heavy disbursements has resulted in a slew of housing finance companies raising debt.

This week alone the industry went to the market to mop up Rs 1,600 crore.

The sudden spurt of debt activity also follows with companies having met the stipulated listing norms of the Securities and Exchange Board of India (Sebi). The need for getting debt issues listed had resulted in a lull in the debt market since September.

Bond issues and securitised paper aggregating Rs 1,600 crore were floated by a clutch of financial institutions. Housing Development Finance Corporation (HDFC) has raised Rs 1,000 crore through its five-year bond at a coupon rate of 5.85 per cent, which said a company executive is the first domestic bond issue this year. HDFC had raised a small issue of Rs 250 crore prior to Sebi imposing listing norms on corporates raising debt.

"During the fiscal, we relied much on bank loans and international funding," said Conrad D'Souza, general manager (treasury), HDFC.

The upsurge in demand for home loans is maximum at the end of a financial year, with the ratio of disbursements at 40:60 in terms of the first half versus the second half, said D'Souza.

Housing finance disbursements are estimated to have increased at a compound annual growth rate (CAGR) of 45.6 per cent during the past five years, with fiscal 2003 reporting a phenomenal 78 per cent growth, according to the latest Icra report on home loans.

The Indian mortgage finance industry has been growing at an impressive rate in the last five years owing mainly to the decline in mortgage interest rates, and debt being increasingly seen as an acceptable means of financing home purchases, not to mention the various tax incentives provided by the government.

LIC Housing Finance is raising Rs 250 crore through five-year bonds, having a three-year put/call option and carrying a coupon rate of 5.95 per cent.

Even as LIC Housing proposes to raise funds from overseas through GDRs, director and CEO S C Jain said: "We are looking at raising Rs 1,300 crore from non-convertible debentures. The process of listing NCDs has been undertaken and the entire amount will be raised through book building."

Dewan Housing Finance has raised Rs 60-70 crore through securitised paper against its home loans. This has a door-to-door maturity of 11-12 years, and carries an interest rate of 6.98 per cent. The Life Insurance Corporation of India is understood to have picked up the entire securitised paper.

The National Housing Bank "" the regulator of housing finance companies "" is also out in the market, raising Rs 250 crore by floating taxable priority sector bonds. These bonds have a maturity of three years with a two year put/call option and carry a coupon of 5.00-5.10 per cent.

NHB has floated these bonds at a time when many foreign and private banks are expected to invest in this paper to meet the shortfall in their priority sector lending targets.