Housing Development Finance Corporation (HDFC) is set to raise $750 million in what will likely be its last fundraising through an external commercial route before the mortgage lender's proposed merger with HDFC Bank
The proceeds will be used to lend to buyers of affordable homes. A group of banks including Mizuho Bank, MUFG, and Standard Chartered Bank are syndicating the five-year credit line.
The universe of foreign banks may expand later. The loan may be priced after adding 110-120 basis points over and above the term SOFR (Secured Overnight Financing Rate), a global rate gauge that is yielding around 2.63% now. If the borrower hedges the full funds it may have to pay another 400-450 basis points going by current cost of currency risk covers in the forwards market.
HDFC has a total borrowing of $65.83 billion as on March 31, FY22, according to the home financier's investor presentation. Just about 3% of it comes from external commercial borrowing (ECB) while 40% is raised through local bonds. The rest is divided into bank term loans (25%) and a larger share of public deposits at 32%.
The management believes that India's housing loan market would double to $600 billion in the next five years with estimated mortgage penetration of 13% of GDP, which would still be lower as compared to emerging economies. “It believes that the optimum path to scale up housing finance is to be housed within a banking structure. The resources pool for lending will be significantly larger and at lower costs," the brokerage said.
The company is waiting for regulatory approval of proposed amalgamation of HDFC with HDFC Bank. HDFC has a gross loan book of $86.15 billion where individuals form about four-fifths of the size.
