HDFC to pick 10% stake in Egypt firm

The Housing Development Finance Corporation (HDFC), as part of its international housing finance initiative, is all set to take a 10 per cent stake in Egypt's first private-sector-led mortgage company "" Egyptian Housing Finance Corporation (EHFC).

EHFC will be formed with an authorised capital base of $16.2 million. Apart from HDFC, Egyptian American Bank will subscribe to a 40 per cent stake in the development finance company, while Bank of Alexandria will acquire a 10 per cent stake.

World Bank body, International Finance Corporation (IFC) and German Development Bank each will hold 20 per cent stakes.

As part of its international housing finance initiative, HDFC had earlier entered into a technical service contract with Egyptian American Bank to provide technical assistance for setting up the mortgage company.

The technical assistance encompassed all aspects of lending such as credit, legal, technical, and recovery, accounting, management information systems, marketing, IT-systems and training. HDFC will also deput a technical advisor to EHFC for two years.

HDFC will hold the 10 per cent stake in EHFC through its wholly owned subsidiary HDFC Investments Ltd (HIL).

HIL has already signed the shareholders agreement to subscribe to the equity. This was HIL's third equity investment in an overseas venture "" the first two being Delta Brac Housing Finance Corporation in Bangladesh and NDB Housing Bank Ltd in Sri Lanka.

The housing mortgage business in Egypt is yet to develop and is at its embryonic stage.

"Egypt as of now lacks essential mechanisms for mortgage lending. The country is yet to see a centralised credit system and property registration procedures also need to be clarified, and a title-search system needs to be devised. The mortgage law introduced in the country three years ago was far from being put into practice," said sources close to the development. Rate of interests in Egypt is also very restrictive which needs to be brought down, he added.