Tag: Deepak Parekh

Housing and realty sector heading into the best of times, says Deepak Parekh

Banking & Finance

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The country’s housing and real estate sector is heading into the best of times, said Deepak Parekh, Chairman, Housing Development Finance Corporation.

“Right now, there is a lot of optimism in the air on the potential of the housing and real estate sector. This isn’t just feel good talk, it is real. The Indian real estate market is on the cusp of a new growth cycle and it is important that we make the best of it,” Parekh said at the CREDAI Financial Conclave 2021 on Friday.

Parekh said that in his over 50 years of work life, he has not seen better housing affordability in the country, such easy liquidity conditions and record low interest rates and such “burning desire” to be a homeowner than in these current times.

Parekh said India is fortunate not to have a housing bubble and said the inherent demand for housing remains immense and concerted efforts have been made to ensure supply at the right price points to meet the needs of various income groups.

Apart from sales, new projects have also been launched, which he termed as “the greatest mark of confidence for the future”.

Noting that a developer’s reputation is of the foremost importance in the real estate business, Parekh said they must focus on reputation and resolution.

“Both these go hand in hand. Choose a resolution path that bails you out the fastest, not necessarily the path that maximises your returns,” he advised them.

Defaulter tag

Parekh also stressed that a defaulter tag is hard to shake-off. “Financial regulators are not willing to look at real estate non-performing loans through a different lens,” he said, adding that financiers have no choice and have to respect the views of the regulators.

While adequate provisioning can be made against NPAs, incremental funding for these projects to be completed becomes difficult, he said, adding that then it triggers a vicious cycle of no other lender wanting to step in either.

He also stressed on the need for a Credit Linked Subsidy Scheme version 2.0, stating that “it has been amongst the best executed and impactful government schemes”.

Parekh stated that both, financiers and developers should continue to work on affordable homes, as the segment has the greatest demand.

He also called on banks and NBFCs to continue to support the credit needs of the real estate sector.

“We need more homes, more commercial premises, more construction and for the Indian economy to grow at its true potential, credit growth cannot stay tepid at a mere six to seven per cent,” he said.

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Financiers line up green deposits as investors ready as ESG concerns trump yield chase, BFSI News, ET BFSI

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As investors become environmentally conscious and look to put their money in green projects, financiers are rising to the cause.

They are offering green deposits to customers which will be used to fund environmentally friendly projects.

UK-based Hong Kong and Shanghai Banking Corp (HSBC) has raised $400 million of green deposits in India and identified financing opportunities to use those funds.

Under its strategy, the bank first finds avenues to finance before raising the resources. The loans are extended for renewable projects, biodiversity linked initiatives, clean transportation and pollution control.

Once the loans are sanctioned they are matched with deposits.

While HSBC will offer deposits and lend the money raised to companies, HDFC plans to raise these funds through retail depositors.

HSBC has opened these deposits only for corporate clients currently, but there is no differentiation in interest rates with normal deposits. The bank is currently offering a tenure ranging from 90 days to five years.

HDFC bonds

Last week, India’s largest private-sector mortgage financier announced the launch of a new green deposit plan to attract environmentally conscious depositors.

The company plans to raise these deposits from individuals to lend to projects by retail borrowers.

It plans to use these funds to lend to standalone homes which use environment-friendly practices, like putting up solar panels and water recycling, or even to women borrowers or self-help groups.

These deposits to be raised from retail and HNI investors will carry interest rates up to 6.55 per cent, while the maturity period would vary from three to five years.

Senior citizens (60 years+) will be eligible for an additional 0.25 per cent per annum on deposits up to Rs 2 crore.

HDFC Chairman Deepak Parekh said, “Today, sustainability is no longer about doing less harm, but about doing more good.” HDFC anticipates growing demand for green solutions and has launched green and sustainable deposits offering for our customers who can grow their wealth while they contribute to serving the needs of a changing world, he said, adding that HDFC is committed to supporting India’s efforts for a sustainable and green low-carbon economy.

At present, HDFC has a total deposit base of Rs 1.54 lakh crore as of June end and even 1% of this the new fundraising will amount to over Rs 1,500 crore.



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HDFC AGM| Home loan demand continues to be strong: Deepak Parekh

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Against the backdrop of the pandemic, Parekh said HDFC had articulated that there are three key monitorables – liquidity, growth and asset quality.

Demand for home loans has remained strong even during the Covid-19 pandemic, Housing Development Finance Corporation (HDFC) chairman Deepak Parekh said on Tuesday at 44th annual general meeting (AGM) of the home financier. Although Parekh acknowledged that lockdown restrictions impacted individual loans, according to him the demand surpassed all expectations, once the restrictions were eased.

“The 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,” Deepak Parekh, chairman, HDFC, said at the company’s AGM on Tuesday. The latest data from Reserve Bank of India (RBI) also affirms continued home loan growth in the system. Home loans grew 10% year-on-year (y-o-y) to Rs 14.62 lakh crore, as on May 21, 2021, as per RBI.

Even in terms of commercial real estate, most companies have not given up their office premises, Parekh said. With the e-commerce boom, demand for real estate is coming from warehousing and fulfilment centres, he added. Similarly, with the build-up of digital infrastructure, demand for data centres has increased. These are segments of the real estate sector that have the potential to grow immensely, he further added.

Against the backdrop of the pandemic, Parekh said HDFC had articulated that there are three key monitorables – liquidity, growth and asset quality. The corporation has always been prudent in identifying loans where there could be stress and has adequately provided for such loans, he said. Parekh also pointed that asset quality has been challenging for non-individual loans at a systemic level.

As of March 31, 2021, gross non-performing loans of HDFC stood at Rs 9,759 crore, constituting 1.98% of the loan portfolio. Its assets under management grew by 10% to Rs 5,69,894 crore as of March 31, 2021. Housing Finance major had reported a 42% y-o-y growth in its net profit to Rs 3,180 crore during the March quarter (Q4FY21). The lender is set to announce its June quarter (Q1FY22) earnings on August 2, 2021.

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Economic recovery is underway but credit growth remains tepid: Deepak Parekh

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HDFC Ltd Chairman Deepak Parekh on Tuesday expressed confidence that the country’s macroeconomic fundamentals are strong and recovery is underway.

“Owing to the second wave, the Indian economy is likely to mirror a similar trend seen in 2020-21, where the first half of the financial year is weaker and the second half is significantly stronger,” Parekh said at the annual general meeting of HDFC Ltd.

However, while parameters such as foreign exchange reserves and capital markets are strong, he underlined that key laggard remains overall credit growth which continues to remain tepid.

Parekh also said the inherent demand for home loans continues to be strong and even in commercial real estate, most companies have not given up on their office space in the pandemic.

He also noted that there are segments of real estate with immense potential to grow.

“With the e-commerce boom, demand for real estate is coming from warehousing and fulfilment centres,” he said, adding that with the build-up of digital infrastructure, demand for data centres have increased.

The demand for housing has also continued to be strong after the easing of the national lockdown and was for both affordable housing and high-end properties.

“Asset quality has been challenging for non-individual loans at a systemic level. the corporation has always been prudent in identifying loans where there could be stress and has adequately provided for such loans,” Parekh further said.

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‘Expense limit should be main criterion for life insurance firms’

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Life insurance companies should be accountable for only one parameter, which is the expense management limit, HDFC Life Insurance Chairman Deepak Parekh has said. The companies should also be permitted to distribute health indemnity and National Pension Scheme, he added.

“Across the world, health indemnity and pension are part of life insurance …Allowing distribution of NPS and health could help improve insurance reach across the country,” Parekh said in his address to the shareholders at the annual general meeting of HDFC Life Insurance on Monday.

Also read: Customer retention is a challenge for HFCs: Deepak Parekh

He further said that discussions are on with the Insurance Regulatory and Development Authority of India (IRDAI) on making expense management limit the main criteria. “This would be similar to the concept of TER or total expense ratio, which is followed by mutual funds as introduced by SEBI,” Parekh said.

The impact of the second wave of the pandemic has been milder and has been largely restricted to the first quarter of the fiscal, he said.

While the second wave impacted life insurance companies, it is expected that business will pick up in the second quarter with the easing of the lockdown restrictions.

Hybrid or phygital model

Noting that the pandemic has increased the awareness of people, including millennials to life insurance, Parekh said the industry has moved to a hybrid or phygital model for offering contactless services.

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Customer retention is a challenge for HFCs: Deepak Parekh

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HDFC Ltd Chairman Deepak Parekh has highlighted the challenge for housing finance companies to retain customers amidst low-interest rates being offered by several banks and increased loan amounts.

“It would be of great comfort for all HFCs to have this issue put to rest,” Parekh said in a letter to shareholders.

“Another niggling point for HFCs is retention of customers. Lenders are susceptible to losing their existing customers to other players who often lure them through lower interest rates or increased loan amounts. As there are no prepayment penalties on floating rate loans, a lender can take over a home loan rather effortlessly,” Parekh said in a letter to shareholders.

Balance transfers only shift assets from one player to another, he said, adding that it does not increase home loans or home ownership at a system level.

“Yet, this is par for the course in a competitive business landscape,” Parekh said, pointing out that onboarding a home loan customer takes a great deal of effort and entails costs as well.

Other regulatory issues

In his letter, which is a part of HDFC’s Annual Report 2020-21, Parekh also highlighted other regulatory issues but said these are his personal views.

Despite differences in interpreting regulations, Parekh said that non-banking financial companies, including HFCs,follow Indian Accounting Standards (IndAS), which is still not aligned with the prudential guidelines.

“This results in differences in opinions between the inspection teams, regulated entities and even the auditors,” he said, adding that it may be prudent to resolve these issues sooner than later.

Insurance loan

He also said that the insurance loan to a home loan customer should be considered as an integral component of a housing loan and be permitted to be classified accordingly.

“Currently, an insurance loan given to a home loan borrower is considered as a non-housing loan. Insurance is voluntary for a home loan borrower,” he said.

Parekh further said that the current regulatory framework might have the unintended consequence of penalising a HFC for maintaining excess liquidity.

“Larger amounts of liquidity are being held by HFCs out of abundant precaution,” he said, adding that a minor tweak which could exclude surplus liquid balances from total assets to arrive at prescribed limits would go a long way in helping HFCs.

Parekh also remained optimistic about the demand for home loans despite the resurgence of Covid infections.

“Despite the economy contracting 7.3 per cent in 2020-21, the demand for home loans surpassed all expectations. Going forward, the risks of recurring waves of infections may result in temporary set-backs, but the inherent demand for homes loans remains stronger than ever,” he said.

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Housing demand structural, here to stay: Deepak Parekh

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Housing Development Finance Corporation (HDFC) Ltd Chairman Deepak Parekh on Thursday said the demand for housing is not pent-up demand but is structural demand and is here to stay.

“In my 44 years of working in the housing sector, I have to say that the strong demand that one has seen for housing in the recent period has certainly surprised on the upside,” he said at the One World One Realty Global Proptech Summit 2021.

The growth in home loans has been aided by low interest rates, softer or stable property prices and continued fiscal benefits on home loans, he further said.

“Technology has enabled developers to virtually showcase their properties and home loan providers, too, have leveraged their digital platforms to continue to serve new and existing customers,” he said.

HDFC enters into co-lending partnership with Indiabulls Housing Finance

According to Parekh, demand for housing is a combination of first time homebuyers, customers moving up the property ladder by shifting to larger homes; acquiring a second home in another location; and the current work from home situation in which proximity to the workplace is perhaps less compelling.

He also noted that the government’s ‘Housing for All’ programme has given a boost to the sector.

Under the Prime Minister’s Awas Yojana, as at March 31, 2021, an estimated 1.13 crore homes have been sanctioned, Parekh said. “This has been a game-changer for the housing sector as the ultimate objective is building a more inclusive and property owning democracy,” he said.

HDFC Bank Q4FY21: What is spooking HDFC Bank’s stock

Meanwhile, noting that infrastructure creation is one way to ensure a sustained recovery, without spiralling inflation, Parekh said that construction and real estate development is going to play a key role in all major global economies.

“And now more than ever before, the role of technology and innovation becomes extremely important,”he said, while pointing out that the construction industry is one of the least digitalised sectors in the world.

Stressing the need for digital infrastructure for the real estate sector, he said prop tech companies can play a big role in accelerating the government’s smart city mission as well as help local level bodies and municipalities in terms of facilitating online approvals of building permits.

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HDFC Capital, Cerberus set to pair up for $1 billion real estate investment fund, BFSI News, ET BFSI

Banking & Finance

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HDFC Capital and global alternative investment major Cerberus Capital Management LP have formed a partnership to create a fund that will focus on high-yield opportunities in Indian residential real estate. The size of the proposed fund will be upwards of $1 billion, said people familiar with the development.

The fund, to be set up through an affiliate of New York-headquartered Cerberus Capital, will target stressed projects, purchase inventory and provide last-mile funding for under-construction residential projects.

“Housing is an integral part of our economy and because of its linkages to other industries and to the labour market, it is a critical sector for ensuring economic growth,” Deepak Parekh, chairman of Housing Development Finance Corporation (HDFC), of which HDFC Capital is a subsidiary, told ET.

The deal is another sign of foreign investment firms’ growing interest in India. “Despite the massive need for housing in the country, a large number of launched projects are in distress, leading to a complete standstill in execution,” said Parekh. “This platform will provide much-needed financing for housing projects and help in delivery of finished units to home buyers.” HDFC and Cerberus declined to comment on the size of the proposed fund.

Currently, the government-backed Special Window for Completion of Construction of Affordable and Mid-Income Housing (SWAMIH) projects is the only large dedicated federal financing pipeline for such projects.

Allow partial exit to lenders

“The structure of the HDFC-Cerberus fund will make it complementary to the government-led SWAMIH fund, as it will also allow partial exit for existing lenders of the project, thereby increasing the scope of projects that can be covered for resolution,” said Vipul Roongta, managing director, HDFC Capital.
HDFC Capital, Cerberus set to pair up for $1 billion real estate investment fundWhile HDFC and other financial institutions have invested in SWAMIH fund, the HDFC-Cerberus fund will be the only private sector initiative with an objective of resolving the issue of stuck and distressed housing projects.

“Cerberus has a long track record of partnering with businesses and properties around the world,” said Frank Bruno, co-chief executive, Cerberus. “We are able to provide tailored solutions in sectors with dislocated funding channels in various forms, such as the purchase of assets, creation of operating and lending platforms, and provision of structured capital to best-in-class operators.”

Cerberus has been active in India since 2019 across verticals including acquisition of non-performing assets, provision of capital to corporates and creation of financial services and real estate platforms.



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