HDFC may cut home loan rates, awaits RBI cue

July 26, 2007: The country's largest Mortgage Loan company, HDFC, may reduce lending rates if the central bank does not tighten rates or resort to a monetary squeeze by hiking the cash reserve ratio (CRR). The company has already seen a decline in borrowing costs in July and is waiting to see whether the decline in rates will be sustained before reducing lending rates.

Although Interest Rates in India have gone up during the first quarter of 2006-07, liquidity generated by forex inflows has helped bring down rates in the money markets. Towards July, interest rates have eased and borrowing costs have come down for institutional borrowers. Some banks, which had hiked their lending rates in the fourth quarter of last year, said they would bring down home loan rates.

“We have seen a reduction in borrowing costs in July. If the decline in rates is sustained, we may bring down lending rates,” HDFC chairman Deepak Parekh said. He, however, added that there was a possibility of a hike in CRR by the Reserve Bank of India this month-end to absorb surplus liquidity. If this happens, rates may not come down, he said.

HDFC’s profits are expected to see substantial upside in the second quarter on account of exceptional items. HDFC would gain close to Rs 311 crore from the sale of its stake in Intelenet to Blackstone. In the second quarter, HDFC will also finalise a non-life partner to whom it will sell 74% stake in HDFC Chubb General Insurance at a premium.

The second quarter would also see Rs 3,114 crore of capital coming in following the preferential allotment of equity shares to Carlyle Group through CMP Asia and Citigroup Strategic Holdings Mauritius.

Source: Economic Times