HDFC plans 100 bps hike in home loan rates this week
February 19, 2007: HDFC is likely to raise
home loan rates by 50-100 basis points this
week, according to HDFC chairman Deepak Parekh.
Speaking on the sidelines of a CII seminar
on corporate governance, Mr Parekh said that
HDFC was still studying the impact of the
rising borrowing costs and would take a final
call on rates this week.
He said that with real estate prices touching
a peak and the interest rates rising, investors
would move out of the market. However, demand
from genuine home borrowers would continue
to be there.
On RBI’s higher provisioning requirements
for real estate loans for banks, Mr Parekh
said that these measures were taken to ensure
stability in the market prompted by genuine
regulatory concerns of higher asset prices.
He later said that there was some softening
of prices in select pockets such as Whitefield
near Bangalore, Noida and Ghaziabad.
Earlier making a theme address at a seminar
on `relationship between good governance and
good performance’, Mr Parekh noted that
barely 50% of the listed companies comply
with clause 49 of the listing agreement relating
to corporate governance, though it’s
over a year since this has been made mandatory.
And only 5% of the listed companies in India
have a depositors and officers policy as against
90% in the US. Mr Parekh said that companies,
which have not complied with this clause,
need to be fined by regulators. Though fine
amount is small, it will attach a stigma to
the company, he said.
Speaking on other issues relating to corporate
governance, Mr Parekh said that companies
have to ensure that audit committees should
not turn into mini-boards.
As for future reforms, Mr Parekh noted that
whistleblowers policy should be made mandatory
rather than the current practice of it being
voluntary. He also added that there is a limited
scope for legislation in corporate governance
and the initiatives should come voluntarily.
The focus should be on increasing share holders
value. He said that succession plans should
be looked at continuously as CEOs are not
permanent fixture. Internationally, companies
spend a lot of time on this, which is not
the case in India.
He noted that the CEO salary was at times
`eyebrows raising’ and that the variable
component should be performance linked and
that the fixed element should be limited in
their salaries. Greater emphasis should be
on adding shareholders value.
As for real estate business in India, it
is not very transparent, he said. Most real
estate companies in both emerging markets
and in domestic markets often are quoted below
the issue price.
High PEs of real estate companies are on
account of high-land valuations they have
and not because of governance practices. Regulators
are often concerned about asset bubble. Real
estate prices go up and down, and one has
to learn to live with them.
Source: The Economic Times
