Mumbai: Housing Development Finance Corp., India’s second biggest mortgage lender, said first-quarter profit rose 26% as a rise in interest rates and higher property prices failed to deter home buyers from borrowing.
Net income rose to Rs373 crore ($93 million) in the three months to 30 June, compared with Rs297 crore in the same period a year earlier, the lender said in a statement to the Bombay Stock Exchange (BSE). That’s in line with the Rs372 crore median estimate of five analysts surveyed by Bloomberg. Revenue rose to Rs1,830 core from Rs1,249 crore.
Housing Development, 12.6% owned by Citigroup Inc., increased lending rates by 2.5 percentage points in three stages since 1 January after the central bank raised overnight rates. Banks were told to set aside more cash as reserves to curb credit demand as inflation accelerated to a two-year high.
The lender’s shares, which rose 79% over the past 12 months, fell 0.7% to Rs1,961.2 at the close on BSE.
The average price of a residential apartment in south Mumbai more than doubled in the past two years to Rs22,000 a square foot, according to Cushman & Wakefield. Office prices in the southern business district also doubled to a 10-year high.
“Despite concerns relating to growth in mortgages, we expect HDFC to maintain its traditional growth of about 27% in disbursements and 25% in loans,” Manish Karwa, an analyst with Motilal Oswal Securities Ltd, said in a note to clients before the earnings announcement.
Loan disbursements grew 29% to Rs5,645 crore, while loans outstanding rose 23% to Rs60,500 crore, the lender said in an emailed statement.
Home-buyers can deduct as much as Rs150,000 a year from their taxable income against interest they pay on home loans.
Rising salaries are also prompting more demand for home loans in an economy that grew an average 8.6% over the past four years. Average salaries in India may rise 15% this year after growing 14% in 2006, the fastest in the Asia Pacific, according to Hewitt Associates Inc., a US-based human resources company.