LIC Housing Finance sees improving home market in FY10

LIC Housing Finance sees improving home market in FY10
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First Published: Mon, Jun 29 2009. 10 55 AM IST
Updated: Mon, Jun 29 2009. 10 55 AM IST
New Delhi: Mortgage lender LIC Housing Finance Ltd expects the housing market to pick up this fiscal year on declining loan rates and as firms focus on affordable homes, its chief executive said on Friday.
Through much of 2008-09, buyers stayed away from the housing market as the economic downturn hit sentiment and as home loan rates stayed high. Reluctance by developers to cut prices too crimped demand.
But a spate of interest rate cuts from October, coupled with price cuts and a shift away from luxury properties by builders, has sparked off some interest.
“There has been a lot of demand spurt,” RR Nair told Reuters on the sidelines of a housing exposition. “This increase we have experienced from February.”
“Afforable housing is a very imaginative idea, because 60-70% of the demand falls in that category.”
The state-run firm has seen a 40% increase in loan applications in the first two months of the fiscal year, and has disbursed double of what it did in the corresponding period a year ago, he said.
The average size of a loan had increased to Rs1.5-1.6 million from Rs1.2 million a year ago, he said.
For the full fiscal year, Nair forecast a 30% rise in loan disbursements to Rs120-130 billion. He also said loan defaults in the year would fall to below 1%, from 1.07% in the previous year.
To meet the rise in demand, LIC Housing will raise funds through a qualified institutional placement of 100 million shares, but Nair did not say how much could be raised.
LIC Housing would also raise debt of Rs150 billion through non-convertible debentures, commercial paper and other instruments, Nair said.
Nair said housing prices had bottomed out and would likely rise in the next six months as builders looked to cash in on the rising market.
“Once cash flow becomes stable and excess inventory is cleared, it is possible builders can afford to increase prices.”
Shares in the firm closed 4.4% down at Rs569.95 in a Mumbai market that was down 1.13%.
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First Published: Mon, Jun 29 2009. 10 55 AM IST