On HDFC-HDFC Bank merger, Parekh asks stakeholders to keep patience

NEW DELHI:  HDFC Chairman Deepak Parekh on Tuesday said that he expected various regulators to take a fair and judicious view of the company’s (HDFC Ltd) proposed merger with HDFC Bank, and asked all stakeholders to remain patient.

“My only ask of our stakeholders is for your patience as we navigate through the complexities of this transaction. More than ever before, we need your trust and support,” Parekh said in his annual address to shareholders, adding that the optimum path to scale up housing finance was to be housed within a banking structure. With the merger, the pool of resources for lending will be significantly larger and at lower costs, he said.

The veteran banker also said the home loan market will double from $300 billion to $600 billion in the next 5 years. He added that despite the recent headwinds in the global macro landscape, he has never been as optimistic about the demand for home loans as he is now. “India should be able to double its home loans to around $ 600 billion within the next five years. This would coincide with the period when India attains its much-aspired goal of being a $ 5 trillion economy,” said Parekh.  

He added, “Despite the doubling of housing loans, India’s mortgage penetration would still remain low at an estimated 13% of GDP. When one looks at comparable Asian economies, the average mortgage to GDP ratios ranges between 20 and 30%. This implies that housing loans in India will have an exponential growth trajectory for decades to come.”

Currently, the home loan market is estimated at over $ 300 billion, which represents a mortgage-to-GDP ratio of just 11%. Parekh’s expressed optimism at a time when general inflation in India is at a multi-year high and the central bank is all set to raise the benchmark rate again on Wednesday, forcing commercial banks to pass this burden to consumers. This, as per real estate experts, will have a negative impact on housing sales.

India’s  home loan penetration still low
Despite the doubling of housing loans, India’s mortgage penetration would still remain low at an estimated 13% of GDP. When one looks at comparable Asian economies, the average mortgage to GDP ratios ranges between 20% and 30%