Despite the gloom in the real estate market, corporate houses such as the Tatas and Anil Ambani’s Reliance group are planning a larger presence in the housing finance segment.
Both the groups, already present in the segment through Tata Housing and Reliance Capital, are in the process of setting up separate housing finance companies (HFCs) to expand their operations. While Reliance Home Finance received approval from the National Housing Bank (NHB) last week, Tata’s application to register Tata Capital Housing Finance is being scrutinised by the HFC regulator.
Religare, the financial services group of the former Ranbaxy promoters, is the other national player that has indicated interest to get into the housing finance segment. The company had recently bid to acquire the home finance division of IDBI Bank.
“The growing interest among the companies to tap the housing finance market is an indication of its potential,” S Sridhar, chairman and managing director, NHB, said.
The government’s recent financial stimulus package, which classified loans granted by banks to HFCs for on-lending to individuals for purchase or construction under the priority sector, is known be one of the major reasons for the sudden corporate interest in this segment. The refinancing window offered by the regulator to HFCs has made fund-raising easier and cheaper for such companies.
| HOME RUN |
| * Reliance Home Finance received approval from the National Housing Bank (NHB) last week |
| * Tata’s application to register Tata Capital Housing Finance is being scrutinised by the HFC regulator |
| * The refinancing window offered by the regulator to HFCs has made fund-raising easier and cheaper for such companies |
| * Reliance will transfer almost a third of its existing home finance loans to its housing finance arm |
“We want to focus more on housing. By setting up a new company dedicated to housing finance, our profile becomes entirely different. Further, our lending costs will come down due to the re-finance window offered by NHB. It will also make this business more competitive,” Sam Ghosh, chief executive officer, Reliance Capital, said. He also felt that housing finance, though less attractive when compared to other consumer finance operations, is a safe bet in the times of economic recession.
Reliance will transfer almost a third of its existing home finance loans to its housing finance subsidiary. The company, which will be present in all major cities to begin with, intends to spread its operations to smaller towns of the country.
According to property consultants, the revival of the real estate business will depend upon the price correction that will take place in the coming months.
Terming it as a buyer’s market, Anuj Puri, chairman and country head of real estate consultancy firm Jones Lang LaSalle Meghraj, said the stagnation will end when the “buyers who were waiting for rates to drop to levels they could afford will make their moves”.
