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"The real estate sector cannot be looked in isolation. There is a genuine demand for houses as the market is dominated by first time buyers. Because of the interest rates, many people have only deferred their decision to buy property," ICICI Bank executive director Madhabi Puri Buch said while addressing newspersons on the bank's public offering totalling Rs 20,125 crore (Rs 201.25 billion).
The demand in the housing sector is not coming from speculators, asserted the ICICI Bank, which is a major player in the housing sector. Unlike the HDFC Bank, which predicted an increase in the home loan interest rates, the ICICI Bank expects the rates to remain stable because of factors including low inflation and high liquidity in the market.
"The rate of inflation has come down to below five per cent...call money rates are around 2-3 per cent, liquidity is robust and foreign investment inflows are being sterilised by the RBI. One can read the conclusion", Buch said while replying to questions on the likelihood of interest rates for housing sector firming up in the near term.
The ICICI's public issue, which opens on June 19 include a domestic offering of Rs 8,750 crore (Rs 87.50 billion) with a green shoe option of Rs 1,312.5 crore (Rs 13.12 billion) and American Depository Shares of Rs 10,062.5 crore (Rs 100.62 billion) including a green shoe option of Rs 1,312.5 crore (Rs 13.12 billion).
The price band of the ICICI issue, which will close on June 22, will be announced on Monday, Buch said.
Collectively the corporate would raise 10 billion dollars from the capital markets in June, J M Financial Consultants managing Director and co-CEO Atul Mehra said. These include ICICI Bank (five billion dollars), DLF (two billion dollars), Sterlite (two billion dollars) and others (two billion dollars).
The public issue, Buch said, would raise the capital adequacy ratio (CAR) from 11.5 per cent to 18 per cent taking into account the bank's financial position as on March 31, 2007, while the tier-I capital would go up from 7.5 per cent to 14.4 per cent.
The funds raised by the public issue, she added, would be utilised for expanding domestic and international operations of the bank and meet the Basel-II norms concerning provisioning and capital adequacy.
Going by international experience, she said, the country was likely to witness high economic growth rate in the next 12-17 years requiring greater participation of the banking in the growth process.
Elaborating on ICICI Bank's the growth strategy for the future, Buch said the bank would tap the rural market in a big way by adopting the hub and spoke model for expanding business.
As part of the rural strategy to cover 80 per cent of country's population, the bank will open branches in each district headquarters of the country, which will act as nodal point for business expansion with the help of associates, she said adding currently the bank has branches in about 80 districts.