Mumbai: Housing Development Finance Corp. (HDFC), the mortgage lender partly owned by Citigroup Inc., said fourth-quarter profit rose 29% as higher rates failed to deter home buyers from borrowing.
Net income rose to Rs550 crore in the three months ended 31 March, compared with Rs427 crore, the company told the Bombay Stock Exchange. The profit was higher than the median estimate of Rs505 crore estimated by four analysts surveyed by Bloomberg.
Total income rose to Rs1,733 crore from Rs1,240 crore.
Interest rates rose in the fourth quarter as the central bank increased its key overnight rate and asked banks to keep more cash with it as reserves to contain an inflation rate that accelerated to the highest in two years.
The Reserve Bank of India raised its key overnight rate by quarter of a percentage point each on 31 January and 30 March, to a four-and-a-half year high of 7.75%.
HDFC raised the rate on its floating rate loans by 125 basis points during the quarter.
Under the floating rate plan, the lender has an option of raising and lowering the rates during the term of a loan as costs rise or fall. HDFC last raised its lending rate on 2 April by 75 basis points to 11.25%.
A basis point is one-hundredth of a percentage point.
Home buyers borrowed 27% more loans in the three months to 31 March, totalling Rs26,200 crore, compared with a year ago.
“Despite concerns on growth in mortgages, we expect HDFC to maintain its traditional growth of 26-27% in disbursements and 25% in loans,” analysts Manish Karwa and Rajat Rajgarhia of Motilal Oswal Securities Ltd said.
Homes have become more affordable over the years. It requires 5.1 years of an average salary this year to pay for a house in a Mumbai suburb, compared with 22 years of average salaries in 1995, it said.
Salaries in India may rise 15% this year, according to Hewitt Associates Inc., a human resources company based in Lincolnshire, Illinois. Salaries rose 13.8% in 2006, the fastest in the Asia-Pacific region, it said.
HDFC estimates that there is a shortage of 25 million housing units in the nation of 1.1 billion people, with two-thirds of the deficit in rural areas. The lender, set up in 1977, is about 80% owned by overseas investors and has funded the purchase of 2.9 million housing units through 229 offices.
Citigroup Inc. on 5 May last year acquired a 9.27% stake in HDFC, raising its total stake to about 12.3%.
Shares of HDFC, which rose 4% since 1 January, closed at Rs1,666.90, up Rs7.20 or .43%, on the Bombay Stock Exchange on Thursday.