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Rate-cut jitters for housing finance firms

Mumbai, July 16: Housing finance companies may be in a disadvantageous position vis--vis banks following the RBI’s decision to let banks raise loans for affordable housing on concessional terms.

The RBI has announced various measures to boost bank funding to infrastructure and affordable housing. Besides allowing banks to raise long-term funds for affordable housing, the apex bank exempted such bonds from mandatory requirements such as the cash reserve ratio, the statutory liquidity ratio and priority sector obligations.

Bankers said the withdrawal of reserve requirements could lower the cost of funds which could be passed on in the form of lower interest rates, hurting the housing finance companies.

Shares of leading housing finance companies such as HDFC ended lower on the stock exchanges today. While the HDFC scrip ended marginally in the red at Rs 975.90, LIC Housing Finance dropped more than 4 per cent to Rs 307.95.

However, a senior official from a housing finance entity told The Telegraph that the home loan rates of banks were close to their base rates, lowering the scope for any cut. According to the RBI norms, banks cannot lend below the base rate, which is the minimum rate at which banks must lend.

If the lenders bring down their base rates, the move will also benefit housing finance companies as they borrow funds from banks.

“We have not only survived the days of the bank teaser loan, but growth rate of our disbursal is much higher than some of the banks,” the official said.

The RBI move was well received by the stock markets today. The BSE Sensex surged 321 points to close at 25549.72.

Investors chased stocks that could benefit from the boost to infrastructure and affordable housing. Shares of IDFC surged nearly 9 per cent to Rs 163 on expectations that it would be a major beneficiary of the RBI move. Jaypee Infratech surged nearly 20 per cent, while DLF and Mahindra Lifespace Developers saw gains of nearly 6 per cent and 3 per cent, respectively.

 
 
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