New Delhi: Even as the US economy reels from the collapse of its housing mortgage market that spawned a global financial meltdown, Michael Bookstaber, a housing finance specialist and the global head of the housing finance group for International Finance Corp. (IFC), was in India to work on a country strategy with particular focus on the housing mortgage business. In an interview, Bookstaber spoke on the ongoing global financial crisis and IFC’s plans for India and its role in broadening the Indian market. Edited excerpts:
The crisis that’s enveloping the world right now… Is the worst over?
In my opinion, we are probably at the mid-point in terms of the underlying mortgage collateral and there is always a roll-through of that to the institutions that have financed it and the behaviour of the underlying financial instruments.
The way I see it, I think that there still is a roll-through of the ill conceived mortgages that have been banked over the last three or four years. The mortgages that have negative amortizations or option arms that have been made in the markets are now adjusting to market levels. The ability of the underlying borrowers to stand by those obligations is now bubbling to the surface.
We are now seeing just how robust those borrowers are and I think we are halfway through the cycle. I think we have another two years yet to see all this actually go through the system.
Advisory role: Michael Bookstaber, head of IFC’s housing finance group, says real private sector pension reform has not yet taken hold in India. Ramesh Pathania / Mint
Has your investment strategy in this market been crystallized?This investment strategy is being crystallized. The focus area of this group (the housing finance group) is housing finance… What we can do in order to help develop this market more than we’ve done in the past. We have a few investments in this market. We have legacy investments. We’ve actually been one of the original investors in HDFC Ltd.
Do you have any investment targets and what will be percentage of housing finance in that?
I think we will. I think part of our strategy will be to try develop some targets but it’s still early days and we’re certainly not ready to give you any numbers on that. I can give you some global numbers, though.
Over the past five-six years, housing finance has become roughly 20% of all our global financial markets business. In some markets we are able to do more because the structures and institutions are more developed, so the percentage of our business is obviously higher than it has been in India or Bangladesh. But it’s not something that’s going to occur overnight.
As we are trying to develop our strategy, we are looking at a time horizon of, say, three-five years. And that will be reviewed and adjusted as the situation warrants.