Dewan Housing plans to be a mortgage bank

Dewan Housing Finance Corporation wants to convert into a deposit-taking housing finance company to raise capital to meet the rising demand for home loans and is awaiting Reserve Bank of India guidelines to launch its quasi-banking activities.

"We want to function like a mortgage bank that has flexibilities in raising capital," said Kapil Wadhawan, managing director of Dewan Housing.

"Now we are unable to open a current account, raise short term money or access savings," he said.

"We want to diversify our services in the housing finance sector."

Pending the transformation into "a mortgage bank", Dewan Housing has been raising finance via debt issues to meet the rising demand for home loans.

"We are in the continuous process of raising capital, such as through the subordinate debt method," Wadhawan said.

In the last six months, Dewan issued optional convertible preference shares worth Rs 540 million to Caledonia Investments,

When the shares are converted, the investors would hold 14 per cent of Dewan's equity capital, he said.

At present, the company is not looking at raising capital from the equity market.

Dewan Housing Finance's capital adequacy ratio is 13.5 per cent.

As on September 30, Dewan Housing Finance Corp.'s net worth was Rs 23.85 billion.

Demand for home loans from banks and housing finance companies hasn't been dented by the interest rates rising sharply in the last one year, he said.

"In fact we have seen a rise in our home loan disbursals by at least 25-30 per cent year-on-year (to Rs 6.7 billion) in the first six months of this year," Wadhawan said.

The loans are disbursed equally between metros and smaller cities, he said.

Dewan Housing operates from over 100 centres, including 50 branch offices and 65 manned service centres.

Draft guidelines on non-banking finance companies, released last week by the Reserve Bank of India will not affect Dewan Housing as the entity is regulated by National Housing Bank, said Prashant Chaturvedi, Dewan's chief financial officer.

"If at all National Housing Bank follows RBI's norms (on NBFCs), then we may have to change our policies," Chaturvedi said.

Recently a senior official in National Housing Bank said there was no plan to implement the RBI's draft norms for housing finance companies.