The vacuum created in the money markets after merger of mortgage major Housing Development Finance Corp (HDFC) with HDFC Bank will lead to a 10-20 basis points (bps) moderation in non-bank lenders’ borrowing cost from Q4FY24 onwards, IIFL Home Finance ED & CEO Monu Ratra told FE.
“I think the merger between HDFC and HDFC Bank will enable players like us to get some share of liabilities, because there will be people who would want to fund HFCs (housing finance companies). So this should support liabilities, making it a bit easier to raise funds over a period of time,” Ratra said.
His comments come on the heels of IIFL Home Finance raising $50 million from US-based International Development Finance Corp. Ratra says the fresh funds would be used to grow the HFC’s affordable home loan portfolio.
The US DFC is also expecting some portion of the funds to go towards funding green buildings and homes, he said.
As of March end, IIFL Home Finance’s total assets under management (AUM) stood at `28,500 crore, of which home loans formed 76% of overall AUM and secured small and medium enterprises loans accounted for the rest. About 95% of the mortgage lender’s home loan book was towards the affordable housing segment, Ratra said.
During FY24, IIFL Home Finance will grow its AUM by 18-20% and on an AUM level target a gross bad loan ratio of below 1.5% as against 1.71% as of March end.
When asked whether there are signs of moderation in the affordable housing segment, Ratra said that new builder launches have indeed declined.
The factors that have led to moderation include stopping of the credit-linked subsidies scheme, halt on developers being granted income tax benefit under 80-IB, mid-segment and premium segment doing very well, and some increase in interest rates.
However, as far as IIFL Home Finance is concerned, it will not be majorly impacted as it has spread its geographical footprint significantly in the last 2-2.5 years, Ratra says, covering at present about 380 locations pan-India.
I think whatever moderation we are seeing in industry today should get offset by the fact that we have a large distribution network. Thus, individually we don’t see impact but industry wise formalised developer launches have dropped, he said.