LIC Housing Finance Limited (LICHFL) has announced ambitious plans to develop a substantial residential real estate fund estimated at Rs.1000 Cr, utilizing external commercial borrowings (ECBs) as the primary financing method.
In a statement made by Mr. V.K. Sharma, the CEO of LICHFL, it was made clear that this initiative is specifically targeted towards residential real estate funding through ECBs. Reflecting on the prospects of this fund, he mentioned that LICHFL is contemplating the figure to range between Rs.700 Cr and Rs.1000 Cr, influenced by the recent Reserve Bank of India's (RBI) authorization for housing finance companies to accumulate up to $1 billion through ECBs.
The RBI had recently sanctioned a significant capital inflow of $1 billion for renowned real estate builders and housing finance solutions. This strategic move aims at bolstering the construction sector, with an emphasis on promoting affordable housing initiatives across the country.
In the course of his presentation at a property exhibition held in Hyderabad, Mr. Sharma articulated that a specialized committee of senior officials has been deployed, diligently engaging with the RBI to discuss various aspects related to ECBs. His demeanor conveyed a sense of optimism regarding these initiatives, although he remained noncommittal about the exact timeline for launching the real estate fund.
It’s worth noting that Mr. Sharma pointed out that ECBs present a more appealing audit trail when compared to indigenous borrowing options. The costs associated with international loans typically undercut local borrowing expenses, and additionally, ECBs provide a gateway to numerous global financial markets, enhancing flexibility in funding.
While Mr. Sharma withheld specifics regarding the fund's official launch date, he affirmed that further information could be disclosed upon the committee’s interaction with the RBI. There has been speculation suggesting that the fund’s establishment could potentially reach Rs.1200 Cr; however, this remains unconfirmed.
Presently, LIC, the promoter behind LICHFL, holds a substantial 40.31% of the shares. Another 40% is retained by both domestic and international institutional investors, while a minor 18.22% is owned by other stakeholders. According to sources close to LICHFL, the anticipated ECB agenda may lead to a reduction in LIC’s shareholdings to approximately 36.54%.
In terms of projections for the current fiscal year, Mr. Sharma disclosed that LICHFL is aiming to issue housing loans totaling Rs.25,000 Cr, an increase from last year's disbursement of Rs.20,000 Cr. Currently, housing loans through LICHFL are extended at an interest rate of 10.25%. The firm awaits the RBI's verdict regarding any potential interest rate modifications, asserting that final decisions concerning the real estate fund will be made subsequent to this critical juncture.