NHB guidelines to hit return on equity of some housing finance companies

Leveraged entities may need to raise equity capital in near term

The National Housing Bank’s (NHB’s) guidelines on strengthening balance sheet of housing finance companies could weigh on the return on equity (RoE) of some large players, on account of the expected equity infusion requirement and inability to raise debts given the high leverage position. 

Latest balance sheets of large HFCs (excluding Dewan Housing Finance Corporation) shows that all players are compliant with the final guidelines of the regulator, including on leverage position. 

Four major non-banking housing financiers — HDFC, Indiabulls Housing Finance, PNB Housing and LIC Housing — have leverage position (borrowings to net-owned funds) of below 12 times, to be achieved