There are two dates which are perhaps of most significance for HDFC.First is October 17 1977. This date marked the fulfilment of a dream to establishIndia's first retail housing finance company. The second significant date is April 42022 when the board of directors of HDFC and HDFC Bank respectively approved a merger oftwo equals.
For HDFC in between these two landmark dates lie several milestonesand memories. During this period HDFC seized the opportunity to create many newinstitutions whilst continuing the pursuit of cumulatively financing over 9.3 millionhousing units. Nothing has been more gratifying than HDFC being described as anextraordinary company run for ordinary Indians by ordinary Indians.
To many including myself HDFC is not just an institution it is afeeling. HDFC has always felt like home and family. Working with like-minded people whoplace honesty integrity and transparency as the foundation of everything they do is thereason why HDFC is a cocoon of security and comfort. I cannot be more grateful to so manycolleagues who are true HDFC lifers'. They are the ones who have patented theHDFC way' of doing things and they are the ones who have gone on to nurture manyothers within the organisation.
Each day year and decade has been rewarding in building acustomer-centric organisation. I truly believe our 45 years of expertise in housingfinance in India is unparalleled. We stand out particularly because of our time-testedefficient and low-cost operating model. This efficiency has been achieved despite a smallstaff base and supported by smart investments in processes and systems. It is ourcustomers who help us evolve our product offerings and service delivery mechanisms.
Today we have the digitalisation tools and expertise to provide anin-principle home loan approval within two minutes. In equal measure we also recognisethat many still want counselling and handholding in their home buying journey. Nocustomer's story is alike. Yet all home buyers are alike as a home is probably thesingle largest investment a person makes in his or her lifetime.
Housing finance products are largely standardised. The keydifferentiator between home loan providers is the emotional quotient -- empathy andunderstanding the needs and feelings of customers. We remain committed to offeringinclusive and customised housing finance solutions across all income segments increasingwomen homeownership encouraging green housing and extending our reach in deepgeographies.
Over the past two years I have been on record several times statingthat I have never been as optimistic about the demand for home loans as I am currently.Despite the recent headwinds in the global macro landscape I continue to maintain thisstance. India is on the cusp of an economic transformation. As the pivot of global growthshifts India is envisaged to remain amongst the fastest growing major economies. Much ofIndia's growth will continue to be powered from domestic consumption.
The aspiration to own a home in India will only grow further. The homeloan market in India is estimated at slightly over US$ 300 billion which represents amortgage to GDP ratio of just 11%. Favourable conditions like rising income levelsimproved affordability and fiscal support augur well for the demand for homes. Real estatein India is on an upcycle. Developers are now financially stronger and more disciplined.
India should be able to double its home loans to around US$ 600 billionwithin the next five years. This would coincide with the period when India attains itsmuch-aspired goal of being a US$ 5 trillion economy. Despite the doubling of housingloans India's mortgage penetration would still remain low at an estimated 13% ofGDP. Now is the time to ask ourselves what will it take for India's mortgage to GDPratio to cross 20% and beyond? When one looks at comparable Asian economies the averagemortgage to GDP ratios range between 20 to 30%. This implies that housing loans in Indiawill have an exponential growth trajectory for decades to come.
At HDFC we know that this is the right time for strategic choices aswe prioritise pathways for future growth. Our moment of truth is that the optimum path toscale up housing finance is to be housed within a banking structure. The pool of resourcesfor lending will be significantly larger and at lower costs. From a regulatoryperspective it is prudent for all large providers of housing finance to operate on alevel playing field with the same rules. Globally too the scale of mortgage assets isexponentially larger in banks compared to non-banking financial entities.
We have at length already articulated the rationale for the proposedmerger which takes cognisance of the future growth potential of the country the evolvingmacro environment and changes in the regulatory architecture.
Trust is the foundation for a successful merger. Fortunately betweenHDFC and HDFC Bank there is a natural affinity. Financial and human capital is criticalthrough a merger process as is a lucid communication strategy on key developments duringthis period. It remains our every endeavour to be available and accessible to all ourstakeholders to assuage concerns in an open and transparent manner. Further both entitiesstand strongly committed to enhanced environmental social and governance (ESG)disclosures.
At this juncture we are awaiting regulatory guidance on the pathforward. We remain respectful of all our regulators and are confident that the outcomewill be judicious and fair at a systemic level. My only ask of our stakeholders is foryour patience as we navigate through the complexities of this transaction. More than everbefore we need your trust and support.
All the members of the board and senior management - past and presenthave individually and collectively helped the Corporation stand tall through the decades.I remain extremely grateful to all of them through the years.
After 45 glorious years of providing homes to millions of customersthe time is right for HDFC to find a new home.
With the blessings of our regulators shareholders creditors and otherstakeholders we look forward to being able to add the third and final significant date inthe history of HDFC which would mark the conclusion of the proposed merger.
Till then I have promises to keep and miles to go before I sleep.