HDFC not impacted by slowdown in mortgage market

By Vipin Agnihotri

Slowdown in the mortgage market has not impacted HDFC, as their growth rates have not been affected at all. The third quarter result of the company clearly proves this point. During this period, HDFC excelled on most parameters, delivering strong top line and bottom-line growth.

As a matter of fact, loan portfolio of HDFC expanded 27 per cent over the previous corresponding quarter, it gained market share and spreads expanded 12 bps to 2.3 per cent. What’s more, its disbursements grew 30 per cent and net interest income was up 62 per cent.

In my opinion, HDFC has beaten its nearest competitors, posting growth rates of over 25 per cent in disbursements. The main reason behind all this is that the goals are clearly laid down by the HDFC management. It is worth mentioning in this regard that there is a four-pronged thrust—growing approvals and disbursements between 20 per cent and 25 per cent, increasing RoE by a percentage point annually, ensuring consistent reduction in the cost-income ratio, and keeping gross NPA levels at less than 1 per cent. So far, HDFC have been able to meet these targets consistently.

According to company sources, HDFC are catering to end-users; 95 per cent of their retail loans are to this class of buyers. It has been noticed that HDFC don’t encourage lending to investors and speculators. In my opinion, this strategy has yielded it rich dividends, as its typical borrower is a first time homebuyer looking for self-occupation.

Point to be noted here is that HDFC’s housing loan portfolio is dominated by individual loans, which by the way makes up 67 per cent of its disbursals. In terms of figures, in the third quarter of 2007-08, non-individual loans grew 39 per cent, on the other hand retail individual lending moderated to 22 per cent.

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