Demand for housing picking up

Demand for housing picking up
The Economic Times, July 23, 2009, Page 10

HOWEVER, Mr Parekh assured shareholders that the company would consider preferential allotment of shares in HDFC Standard Life to HDFC shareholders whenever the insurance firm chose to go public.

HDFC reported a net profit of Rs 564.92 crore for the quarter to end-June, up from Rs 468 crore in the year-earlier period. Although profits improved, HDFC’s net interest margins declined slightly, falling to 2.19% for the quarter from 2.21% in FY09 and 2.32% the year before.

Mr Parekh said that margins in the earlier years were flattered by cheaper cost of funds thanks to the preferential allotment of shares to Carlyle and Citigroup, which raised Rs 3,114 crore in May 2007. The HDFC chief also said that there was a resurgence in demand for housing, which was preventing property rates from falling while increasing loan growth.

HDFC approved loans worth Rs 12,259 crore during the quarter, up 23% year-on-year, while disbursals grew 21% to Rs 8,688 crore. Compared with the preceding quarter—the last quarter of the previous fiscal year—HDFC’s loan approvals and disbursements grew 45% and 19%, respectively.

Responding to a query on outlook for interest rates, Mr Parekh said, “With the increased government borrowing, going forward everyone expects interest rates to rise. But for the present, there is ample liquidity and interest rates are soft”.

Shares in HDFC closed 4.43% down at Rs 2,410.30 on Wednesday amid concerns of the expected equity dilution as a result of its proposed fundraising.

One analyst at a private bank, who did not wish to be named, said there were concerns that the Rs 4,000-crore QIP issue which could expand the company’s equity base by 3.5% would put further pressure on margins. “The money will be used to buy shares of HDFC Bank, which will not earn as much income as, say, lending for home loans,” the analyst said.