Mumbai: India’s oldest mortgage lender Housing Development Finance Corp. Ltd (HDFC) on Tuesday reported a 23% rise in fourth quarter earnings, buoyed by good growth in loan portfolio as rising interest rates have not been able to dent demand for home loans in the world’s second fastest growing major economy.
Profit for the quarter rose to Rs 1,141.95 crore against Rs 926.38 crore in the corresponding quarter last year.
Loan approvals during the year were up 24% to Rs 75,185 crore and loan disbursements rose 20% to Rs 60,314 crore.
HDFC did not give most of its quarterly numbers.
Its mortgage book in March stood at Rs 1.17 trillion against Rs 97,967 crore in the previous year, the lender said. During the year, HDFC sold loans worth Rs 4,379 crore.
According to Keki Mistry, vice-chairman and chief executive of HDFC, the firm will look to grow its loan book at 20% in fiscal 2012, but analysts said this might not be possible in a rising interest rate scenario unless HDFC focuses on developer’s loans more than retail housing loans.
Retail loans constituted for 67% of the loan book of HDFC. It saw a marginal fall in commercial real estate exposure, which is at around 12%, Mistry said.
During the year, individual approvals grew at 25% and disbursements grew by 27% compared with the previous year.
The lender’s net interest margin (NIM), or the spread between yields on investment and cost of deposit, were up in this quarter at 4.39% as against 4.27%.
This was because HDFC has been able to pass the burden of repeated rate hikes to the borrowers, Mistry said. It expects to maintain the NIM on the back of stable spreads in interest paid and interest earned, he added.
HDFC shares fell 0.37% to close at Rs 661.65 a piece on the Bombay Stock Exchange on Tuesday even as the exchange’s bellwether equity index Sensex was down 0.09% at 18512.77 points.
“The demand for individual home loans continued to be robust, despite rising interest rates. Other enabling factors included rising disposable incomes and continued fiscal incentives on housing loans,” HDFC said in a statement.
Up to Rs 1.5 lakh interest payment on home loan is deducted from one’s annual income of a borrower while computing income tax.
Besides, payment of principal amount up to certain level, too, enjoys tax benefit.
According to analysts, the scenario may reverse in the coming year as people are deferring house purchases in a rising interest rate scenario. HDFC’s chairman Deepak Parekh said in a recent interview that property prices are correcting in smaller cities but in metros demand outstrips supplies and as such, property prices are not correcting there. High property prices is another reason for delaying the purchasing of a house.
Total income for the quarter rose 13.36% to Rs 1,287.81 crore from Rs 1136.08 crore in the corresponding quarter last year.
Non-performing assets for the quarter, as a percentage of bad debts, stood at 0.77% as against 0.79% in the previous year. The dual-rate home loan products introduced by HDFC, in which home loans rates where fixed at a low rate in the first few years and then would be priced normally, required the lender to set aside money as per prudential norms.
It has set aside Rs 813.53 crore, including provisioning of Rs 446.54 crore in respect of housing loans granted under the dual rate scheme.
Under this scheme, introduced in April 2010, home loans up to March 2011 had interest rate of 8.25% and in the next year, the interest rate was fixed at 9%. Only from the third year would the loans be market-driven. The mortgage lender’s capital adequacy ratio stood at 14% in fiscal 2011.
PTI contributed to this report.