Dewan Housing raises $70 mn under low-cost ECB window

Tenure of loan is for eight years and money has been raised under specially created ECB window for on-lending to affordable homes

Mortgage lender Dewan Housing Finance has raised $70 million from World Bank Group member IFC under the external commercial borrowing (ECB) window.

The landed cost of money, however, is higher than the normal at over 10 per cent.

"We have raised $70 million from IFC last week as part of the ECB programme," company's Chairman and Managing Director Kapil Wadhawan said.

The tenure of the loan is for eight years and the money has been raised under the specially created ECB window for on-lending to affordable homes, he said.

The money got raised at a premium of 3.08 per cent over the Libor, the international benchmark rate, he said.

However, the landed cost of borrowing is not in the "sub-10 per cent" range as the cost of hedging also gets added to the interest rate, Wadhawan said.

Notably, financial institutions raise resources at higher single digit interest rates domestically through various channels.

When asked about the benefits of the ECB route, under which home loan financiers raised $600 million in FY'14 as against a targeted $1 billion, Wadhawan said it helps them diversify the liability base, beyond ones like public deposits, refinance, bonds and bank funding lines.

Sector regulator National Housing Bank chairman R V Verma conceded cost is a factor but stressed that the opportunity offered by ECB route is to go out and seek finance.

He said whenever the domestic markets get tightened for liquidity, this route offers the comfort of going out and raising the resources to meet the needs.

Other financiers, including HDFC, LIC Housing Finance and PNB Housing Finance, have utilised the window to collectively raise the money, according to NHB, which has sought an extension to raise its $200 from the last fiscal's quota in FY'15.