The external commercial borrowing market may have slowed down because of a slump in projects, but housing finance companies are increasingly looking to use this route for lowcost funds. "We are evaluating the option to raise $250 million Rs 1,662 crore) through ECB at Li(.bor plus 150-200 basis points," said Srinivas Acharya, managing director of Sundaram BNP Paribas Housing Finance.
The country's largest mortgage lender, Housing Development Finance Corp, raised $300 million through external commercial borrowing in April under the low-cost affordable housing scheme to refinance its earlier ECB.
It also raised another $500 million for on-lending and sublending for over five years, central bank data showed.
Gagan Banga, vice-chairman and MD, Indiabulls Housing Finance said his company is looking to raise $300 million through the ECB route, subject to central bank approval. A low-cost affordable house is defined as one on which the loan amount is less than Rs 25 lakh, property cost is up to Rs 30 lakh and the carpet area is not more than 60 square metres. The Reserve Bank of In dia had allowed both housing finance companies and developers to raise funds though ECB for low-cos affordable thouse is defined as one on which the loan amount is less than Rs 25 lakh, property cost is up to Rs 30 lakh and the carpet area is not more than 60 square metres. The Reserve Bank of In dia had allowed both housing finance companies and developers to raise funds though ECB for low-cost affordable housing projects. It is cheaper to borrow through ECB when the rupee is weak (as each dollar will fetch more rupees), but turns equally expensive if the currency weak ens further (interest and repayment cost in rupees will go up).Cost of borrowing would come to 1.5% above Libor for five years at 1.6% for AAA-rated companies.
During the first four months of the financial year, companies have raised $8.3 billion through ECB against $8.7 billion in the same period last year. Acharya said Sundaram BNP Paribas is watching volatility in the rupee. "If the rupee weak ens further, it will be a challenge to repay the loans," he said.
HDFC was the first housing finance company to raise funds through this route last year.