HDFC targets Rs. 8b for housing loans in 2006

by Hiran H. Senewiratne

The Chairman of the Housing Development Finance Corporation Bank of Sri Lanka (HDFC) S.M.M. Yaseen said that this year it has budgeted to provide Rs. 8 billion worth of housing loans for public servants and low income category segments, which is a increase by twofolds.

He said that last year they were able to provide Rs. 4 billion worth of housing loans which has doubled that amount.

Foreign investors have also expressed interest to invest here with HDFC.

The Bank is an A rated entity by Fitch Ratings.

This is one of the few public sector organisations, which runs with self-generated funds recently. It had raised Rs. 150 million through the issue of Debentures. We were the first public sector company that went for securitisation many years ago. "We have access to lands in the country due to Government support.

This is an advantage for us in getting into the real estate business in a big way," he said in an interview with the Daily News. Our total loan portfolio is Rs. 8 billion for 60,000 housing units out of which we have provided Rs. 4 billion worth of loans to build 10,000 housing units. He said that the country needs 80,000 new housing units for per year and we are contributing loans for the construction of 20,000 houses per a year. Here are excerpts from the interview:

Q: It is said that most of banks and financial institutes provide housing loans for the public, in that scenario what is the market share of the HDFC bank?

A: HDFC mandate is to provide housing loans for the lower and middle-income category segment in the country. At present we have a 20 per cent market share and we are dominating in the lower income segment. In addition the HDFC is also implementing the government servants housing loan scheme.

Q: What is your target for 2006?

A: This year our physical target is to provide 5700 housing loans for low income category, 1720 housing loans for middle income and 1290 loans for wider income group, which will finally cost us Rs. 5 billion. Right now we have tied up with Employees Trust Fund (ETF) to provide housing loans at a reasonable rate to the private sector.

Q: Recently HDFC went for an Initial Public Offering (IPO). What was the success of it and its objective?

A: The IPO aims to raise Rs. 550 Million by way of the issue of 2.5 Million shares at Rs. 220/- per share. The special attraction is that the price of Rs. 220/- is in actual fact a discount price as the book value of an ordinary share of par value Rs. 100/-, stood at Rs. 245.57 at the end of the last fiscal year - a discount of almost 10%. That was the first time that a public sectors entity, which oversubscribed 12 times and was able to raise Rs. 6,600 million from it.

Q: Housing problem is one of the major issues in the country especially of the low-income category. Is there any strategy to assist them?

A: HDFC Bank is planning to have urban sector housing development projects to assist middle and low-income category.

That is because most of housing and condominium projects are cater to niche markets, which are for the high-end income group. To cater to this low income and middle income category HDFC Bank has set up a separate unit HDFC Real Estate Development Company.

Under that it has taken steps go for a condominium project at Edmonton Road at a cost of Rs. 900 million on a cross subsidiary basis with the Government. Another joint venture project at Sri Sangaraja Mawatha to construct 300-unit housing project at a cost of Rs. 2 billion.

Q: HDFC after becoming a commercial bank has become more profit oriented rather than service oriented. What is your response?

A: We are in the housing real estate sector and our role is to intervene to stop increase real estate prices in the country. At present real estate prices are increasing at an alarming space which is unaffordable for the normal people. We are coming into help to stabilise the market to protect middle and low-income group in the country. Our interest rates are less than other places.

Q: HDFC is one of the leading housing loan providers in the country. How do you assist tsunami-affected people?

A: We have given time to tsunami affected customers an additional time period to repay their loans. We give new housing loans for 400 tsunami-affected families.

Q: Do you have any plans to support the people in housing loans in the North and East areas of the country?

A: We have branches in Batticaloa, Ampara, Vavuniya and we are operating Trincomalee from Anuradhapura branch.

We are going to start a condominium project in Ampara soon.

Q: What type of strategies you adopt to attract new customers and retain existing customers in this competitive business?

A: That was clearly shows in the recent IPO. People have trust and confidence on us. To keep the market a live we are introducing innovative products for our customers. HDFC is the only organisation where the housing and real estate sector provides a complete package including legal assistance for technical assistance for the convenience of customers.

Q: How do you face competition from other private banks and lending institutes?

A: Firstly I would like to tell that we are on-line internally and externally. We have integrated with all leading banks in the country.

We are the trendsetters in the housing and real estate sectors. We are working on a cross subsidiary basis with the government to provide housing and real estates at reasonable rates.

Q: What are the future plans of HDFC?

A: Our core business is housing loans. Our Real Estate Development Company enables to focus on the real estate business to assist low and middle income segments in the country.