At a time when rating agencies have flagged concerns over the rising delinquencies in the affordable housing segment, State Bank of India (SBI) on Thursday said it plans to raise Rs 20,000 crore through long term bonds to fund affordable housing.
SBI had earlier proposed to raise Rs 5,000 crore for the purpose. “A proposal will be submitted to Executive Committee of Central Board (ECCB)… for approval for issuance of long term bonds of Rs 20,000 crore for financing of infrastructure and affordable housing in domestic and overseas market instead of Rs 5,000 crore intimated earlier,” SBI said in a filing to the stock exchanges. The bank did not specify whether the borrowing would be in rupee denomination or dollar.
The executive committee of the central board is scheduled to have a meeting on January 17, it added. Earlier this week, SBI announced plans to raise up to $ 2 billion (over Rs 12,600 crore) by issuing bonds in US dollar or other convertible currency over two fiscals to fund overseas expansion.
SBI said the fundraising will take place through a public offer and/or private placement of senior unsecured notes in US dollar or any other convertible currency during 2017-18 and 2018-19.
However, a joint report by Moody’s and its domestic affiliate ICRA had recently said competitive pressures and larger exposure to the self-employed are the prime reasons for the build-up of stress in the segment. “While asset quality is expected to remain stable in the traditional housing segment, delinquencies could further build up in the affordable segment in the calendar year of 2018,” Icra’s structured finances head Vibhor Mittal said.
According to an RBI study, among all slabs, housing loans up to Rs 2 lakh had the highest level of non-performing assets (NPAs) and the public sector banks reported higher NPAs than the housing finance companies in the last two fiscal years.
“While the total disbursement of housing loans by public sector banks as well as the housing finance companies witnessed a deceleration in 2016-17, there was significant growth for the lower slabs. Housing loans up to Rs 10 lakh recorded robust growth in 2016-17, primarily driven by the PSBs,” the RBI said. While the number of beneficiaries for loan amounts up to Rs 10 lakh has increased sharply in 2016-17, the number of beneficiaries for higher value loans of above Rs 25 lakh has, in fact, declined marginally during the year, the RBI said.
“With the sharp rise in loan disbursements and number of beneficiaries in the affordable housing segment, non-performing asset (NPA) ratios of PSBs and HFCs have increased moderately in 2016-17,” the RBI study said.
HDFC Capital Advisors Ltd, a wholly-owned subsidiary of HDFC Ltd, had recently achieved the initial close of its second affordable housing fund — the HDFC Capital Affordable Real Estate Fund – 2 (H-CARE-2). This will be combined with the HDFC Capital Affordable Real Estate Fund-1 (H-CARE-1) raised in 2016 to create a $1 billion platform targeting affordable and mid-income residential projects in India’s leading 15 cities.