The Hindu : Business : High interest rate hits property buying

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Tuesday, Jun 19, 2007
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High interest rate hits property buying

Special Correspondent

ICICI Bank is toying with the idea of tapping private funds

CHENNAI: The rising interest rate has no impact on the delinquency in ICICI Bank’s home loan portfolio, Madhabi Puri Buch, Executive Director of the bank, said here on Monday.

Addressing a press conference here on the eve of the bank’s Rs. 8,750-crore public issue, she said the rising interest rate had not impacted two-thirds of its home loan customers, whose payment period had been extended. In the case of the remaining one-third, their equated monthly instalment (EMI) amount had gone up. This had not really had any impact on the delinquency since their income levels had gone up. The value of their assets, too, had gone up, she added.

She said the growth in home loan disbursals had decelerated in the wake of the hardening interest regime. ICICI Bank, she said, believed that the house-seekers had only deferred their decision to buy a home.

A combination of factors ranging from rising property price, hardening interest regime and higher EMI amount had made property buying not affordable at the moment, she said.

“The demand will come back. It will come back in a different form,” she said.

She said all overseas subsidiaries of the bank, except the one in Canada, had broken even. In fact, the subsidiary in the U.K. had been contributing in excess of 20 per cent as return on equity, she said.

Ms. Buch said the bank had decided to transfer its holdings in insurance (both life and general) and mutual fund ventures into an independent company. The bank would hold 94.10 per cent in the new outfit. The bank was also toying with the idea tapping private equity funds by offloading 5.9 per cent. The Executive Director said the bank had received an enquiry that promised to fetch Rs. 2,600 crore for 5.9 per cent. This had effectively meant an enterprise value of around Rs. 45,000 crore for these three subsidiaries put together, she said. Depending on the nature of regulations, the bank could dilute its stakes in them over a period.

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