Housing Development Finance Corp (HDFC) Chairman Deepak Parekh said on Tuesday that while India’s macroeconomic fundamentals are strong and recovery is underway, weak credit growth remains the key laggard.
“Owing to the second wave, the Indian economy is likely to mirror a similar trend seen in FY21, where the first half of the financial year is weaker and the second half is significantly stronger,” Parekh said in his chairman’s address at the 44th Annual General Meeting of HDFC.
However, in terms of the overall macroeconomic environment, “the key challenge remains the unpredictability of the virus. The world is still susceptible to recurring waves of infections. Thus, economic recovery will remain uneven and patchy,” he said.
There are a couple of factors working in favour of India. The foreign exchange reserves and foreign direct investment inflows are at a record high, agriculture growth is expected to remain strong with foodgrains estimated at over 305 million tonnes. RBI’s accommodative stance and government measures to alleviate covid-related stress would also help in the recovery, Parekh said.
“The Coronavirus (Covid-19) pandemic has reaffirmed that there can be no greater security in life than a home. The inherent demand for home loans continues to remain strong,” Parekh said.
The national lockdown impacted individual loans, but once restrictions were eased, “the demand surpassed all expectations. We are confident that demand for housing will continue to be strong,” he said.
In FY21, demand for housing was both for affordable and high-end properties. The average size of housing loans stood at 29.5 lakh, compared with Rs 27 lakh in the previous year.
According to the finance veteran, in terms of commercial real estate, most companies have not given up their office premises, and with the e-commerce boom, “demand for real estate is coming from warehousing and fulfillment centres”.
Similarly, with the build-up of digital infrastructure, demand for data centers has increased.
“These are the segments of the real estate sector that have potential to grow immensely,” Parekh said.
HDFC, according to its chairman, will continue to monitor three key factors — liquidity, growth, and asset quality.
As a prudential measure, the mortgage finance company is maintaining higher levels of liquidity.
However, asset quality has been challenging for non-individual loans at a systemic level, Parekh said. HDFC has identified such loans and has adequately provided against them.
Gross non-performing loans at March 31, stood at Rs 9,759 crore, or 1.98 per cent of the loan portfolio. The company was required to carry total provisions of Rs 5,491 crore, but it carried a provision of Rs 13,025 crore, which is 2.62 per cent of the exposure at default.
The company declared a dividend of Rs 23 per equity share of the face value of Rs 2 each for the financial year.
HDFC also sought shareholder nod to increase the borrowing limit from Rs 5 trillion to Rs 6 trillion, and for approval of non-convertible debentures.
Dear Reader,
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.
Digital Editor
Leave a Comment