Through NHB, the government has made available additional funds to the tune of Rs 6,000 crore (Rs 60 billion) to the housing finance sector. The bank is also busy clearing oversees borrowing applications from housing finance firms to boost their funding requirements. NHB chairman and managing director S Sridhar speaks to Joe C Mathew on the current scenario. Excerpts:

Housing finance companies have recently claimed that they need Rs 40,000 crore (Rs 400 billion) during the fourth quarter and demanded further support. How do you react to their plea?

I don't think HFCs are facing such serious trouble. At least, the results of listed HFCs do not indicate so. They have been making healthy profits and are doing reasonably well.

It is true that the global economic crisis has affected them, but there is no sector that remains immune. To help them tide over this liquidity crisis, the government and RBI have announced a series of policy measures in the last two months.

The re-finance window of Rs 4,000 crore (Rs 40 billion) and Rs 2,000 crore (Rs 20 billion) to fund the financing of rural houses for economically weaker sections are specifically meant for them.

So, you don't buy their argument?

Their assessment does not look convincing as the overall accumulated exposure of HFCs is only about Rs 1,20,000 crore (Rs 1,200 billion). The average annual disbursement is only Rs 35,000 crore (Rs 350 billion). How can their three months' requirement now be one-third of their total exposure accumulated over years?

Further, we are not the only source of funds. The policy measures announced by the government will enable them to tap funds from other banking and non-banking sources. Whenever there is a market failure we have to support them. We have done that.

The government has announced plans for an SPV to provide liquidity support to non banking finance companies. Do you think the facility should be extended to HFCs also?

As of now, we have addressed almost all their issues. We will review the result of the recent policy initiatives and re-assess the need for further support. I will not comment on the SPV, as we are yet know the details.

How many HFCs have availed the Rs 4,000 crore (Rs 40 billion) re-financing facility provided through NHB?

We have so far disbursed Rs 800 crore (Rs 8 billion) to four companies. Some more applications have been approved. About eight of them are in the examination stage. More firms will approach us in the coming days.

Since you can access funds at 5.5 per cent through the repo route, are you offering re-financing at a discounted rate?

The funds for the current disbursement came at 6.5 per cent. The next tranche would be available to us at 5.5 per cent, but we have not decided on the re-finance rates. We will see if HFCs are passing on the lower cost of funds to the customer. Some of them have announced a cut in the interest rates, but we want others to follow. We will review our rates once we assess the impact. HFCs may get funds at cheaper rates after that.

Given the slump in the real estate market, how do you foresee NHB's performance?

We should do well. Our disbursement for the year is likely to be Rs 11,000 crore (Rs 110 billion) as against Rs 9,036 crore (Rs 90.36 billion) last year. We also expect 15 per cent growth in our loan portfolio.

Real estate players were disappointed to see themselves excluded from the list of sectors that got RBI approval for restructuring the bank loans twice. Do you find merit in their argument?

RBI has allowed a single restructuring for the real estate sector. This in itself should be considered an achievement.

The real estate sector should realise that such facilities were given to sectors that face cyclical downturns. The real estate sector has been booming for years together and this is the first time they are facing a crisis of this magnitude. They should understand that any restructured loan is considered as a weak account.