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The State-owned Housing and Urban Development Corporation (Hudco) will consider proposals under affordable housing from the Government of Karnataka, in a partnership which involves private developers tying up with the state government for developing affordable units.

Hudco Chairman and Managing Director Veerappa P Baligar told Deccan Herald that apart from Karnataka, the corporation will also be considering proposals from Rajasthan and West Bengal governments as it is aiming to finance construction of at least 5 lakh affordable housing units across the country in the current fiscal.

Responding to a query on the affordable housing segment, Baligar said that Hudco’s growth target is to increase by about 10 per cent annually for the next five years. In this context, he pointed out that it has already financed 3.8 lakh housing units this year, while saying, “We hope to achieve 5 lakh units as compared with financing 4.3 lakh units in 2011-12 and more than 90 per cent of these have been for the economically weaker sections.”

Further, he said Hudco will focus more on development of these housing units in rural areas, with nearly 60 per cent expected to be in these regions. “We are targeting to disburse loans worth Rs 2,000 crore for facilitating construction of houses for the economically weaker sections through state government grants,” he said.

At the same time, Baligar continued, the techno-financial institution engaged in financing and promotion of housing and urban infrastructure projects across the country is aiming to increase its total disbursement by 10 per cent every year.

“We want to encourage state governments to undertake more of such projects than doing it ourselves,” he added.

Having a ‘Miniratna’ status from the year 2004-05, Hudco currently disburses a sizeable 15 per cent of its total loans to the private sector. This company with a pan-India presence - covering around 1,800 cities and towns across the country - has been operating its financing business profitably since inception, including a profit after tax of Rs 630.33 crore for fiscal 2012 and Rs 297.43 crore for the six months ended September 30, 2012. Its net worth as of the last fiscal stands at Rs 5,988.89 crore.

Tax-free bonds

In the meantime, Hudco is coming out with a tax-free bonds issue to raise resources of up to Rs 750 crore with an option to retain oversubscription of up to Rs 5,000 crore. These bonds have a face value of Rs 1,000 each and are in the nature of secured, redeemable, non-convertible debentures.

It intends to utilise the issue proceeds for lending purposes, working capital requirements, augmenting the resource base of the company and for other operational requirements. Last year, the company mobilised Rs 5,000 crore and managed to utilise all the funds, according to Baligar.

The minimum subscription is five bonds across all series and in multiples of one bond thereafter. The issue will open on January 9 and close on January 22. The bonds have been assigned credit rating of ‘CARE AA+’ by CARE and ‘IND AA+’ by India Ratings and Research Private Limited (IRRPL), indicating high degree of safety regarding timely servicing of financial obligations and carrying low credit risk. Baligar points out that their bond offers 15 basis points more than other issuers which have recently launched their tax-free bonds and for the first time NRIs and FIIs (foreign institutional investors) will be able to partake in the issue.

The coupon rate for qualified institutional buyers (QIB), corporates and high-net worth individuals has been fixed at 7.51 per cent per annum for 15 years and 7.34 per cent for 10 years.

For retail investors, the coupon rate is 7.84 per cent for 10 years and 8.01 per cent for 15 years. The bonds will be listed on the National Stock Exchange.