HDFC to raise Rs.2K crs via Masala Bonds

MUMBAI: Deepak Parekh whose company HDFC is tapping the international markets with a Rs 2,000 crore `Masala Bond’ issue has said that India should take advantage of global negative rates to draw capital into housing.

No corporate has floated a Masala Bond issue yet. International Finance Corporation – an arm of the World Bank was the first to use this instrument. The institution had first issued these bonds in 2014. Subsequently Reserve Bank of India relaxed foreign borrowing norms for companies that issued rupee denominated debt.

Although the timing of the issue coincides with the Brexit referendum and market turmoil, HDFC is understood to be going ahead with its plan. In his annual chairman speech, Parekh made a strong case for permitting institutional loans for land purchase.

“If the RBI were to permit housing finance companies and banks to fund land transactions – at least land that is being used for residential purposes, it could substantially bring down overall costs for the end consumer,” said Parekh. According to Parekh, with sufficient checks and balances by the RBI and permitting more players to fund land transactions responsibly, the government’s objective of affordable housing can be fulfilled.

“One hopes that regulators will also be more open to ideas of accessing new funding sources. A quarter of the world’s economy now has negative interest rates, so savers are keenly searching for higher yielding, safe assets. The time is right to explore ways in which these savings can be tapped to fund specific pools of home loans in India,” said Parekh. He pointed out that this is not risky as there is tangible security in terms of the mortgaged properties. “While there should be prudent policies, regulators do need to be less timid and allow such cross border transactions,” he said.

Credits ET Realty

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