HDFC Ltd secures $1.1 bn syndicated social loan for affordable housing

This transaction is the largest social loan globally, the first social external commercial borrowing (ECB) loan out of India and the largest ECB loan deal from a HFC or private NBFC in India

Mortgage financier HDFC Ltd on Friday said it has completed a $1.1 billion syndicated social loan facility at a 3.3 per cent coupon rate for financing affordable housing projects in the country, making it the largest social finance issuance.

This transaction is the largest social loan globally, the first social external commercial borrowing (ECB) loan out of India and the largest ECB loan deal from a housing finance company/ private NBFC in India.

The loan was priced at 90 basis points over the secured overnight financing rate (SOFR). It is a broad measure of the cost of borrowing cash overnight collateralized by treasury securities.

In July 2022, the Reserve Bank of India (RBI) increased the limit of ECBs under the automatic route from $750 million to $1.5 billion, and the mortgage has indicated in its earnings call that it is in the process of raising funds under this window of about $1.1 billion.

MUFG Bank, Ltd. (MUFG) was the lead social loan coordinator for this transaction and was one of the mandated lead arrangers and borrowers (MLAB). CTBC Bank, Co., Ltd., Mizuho Bank, Ltd., State Bank of India and Sumitomo Mitsui Banking Corporation were the other MLABs and Joint Social Loan Coordinators.

The funding secured by the mortgage financier will go towards financing affordable housing loans. In the quarter gone by, around 23 per cent of home loans approved in volume terms and 10 per cent in value terms by HDFC was towards affordable housing. Since its inception in 1977, HDFC has financed 9.5 million housing units and has a gross loan book of Rs 6.7 trillion.

“Affordable housing is a critical component of quality infrastructure as also a growth driver for the real estate industry and the economy at large given its strong linkages to nearly 300 industries. It contributes to capital formation, employment, and income opportunities. A boost to affordable housing will play a significant role towards the ‘Housing for All’ objective of the government. The aspiration to own a home is inherent in every household,” said Deepak Parekh, Chairman, HDFC Ltd.

Mortgage financier HDFC Ltd’s net profit grew 22 per cent year-on-year (YoY) to Rs 3,668 crore in the April-June quarter (Q1) of FY23, aided by dividend income and lower impairment losses on financial instruments.