The much-awaited foray of IDBI in housing finance is to fructify shortly with Tata Finance Ltd deciding to sell its entire stake in Tata Homefinance Ltd to the financial institution for an undisclosed amount.

It is expected that this venture would be one of the building blocks for IDBI's housing finance asset creation initiative, an IDBI release said in Mumbai on Friday.

Tata Homefinance, which is an unlisted company with a capital base of Rs 49.98 crore (Rs 499.8 million), has 16 branches in 11 cities.

The share purchase agreement was signed between IDBI executive director A K Doda and TFL executive director F J da Cunha in Mumbai on Friday.

The actual share transfer was expected to take place after completion of certain mutually agreed steps within a period of about two months.

IDBI said its general manager Melwyn Rego has been appointed as the chief executive officer of the proposed housing subsidiary, which would focus on individual housing loans, especially to the salaried class.

TFL sources said, "Tata Finance wanted to exit from the housing finance business as it wants to focus on auto finance. We have also concurrence from UK-based housing mortgage company Abbey National, which holds 37 per cent stake in Tata Homefinance, for this transaction."

The loan portfolio of Tata Homefinance was in excess of Rs 300 crore (Rs 3 billion), they said, adding TFL would buy out Abbey's stake.

IDBI said it plans to leverage the skills of the existing employees of Tata Homefinane while supplementing the staff strength.

Over a period of time, the branch network would be expanded with on-line IT linkages to reduce processing time and offer high quality service to clients.

IDBI's housing finance subsidiary would offer both fixed and floating rate loans depending upon client needs.

With IDBI's strong financials, the housing finance subsidiary would be in a position to leverage the brand of the parent company while at the same time reinforcing IDBI's brand in this sector, it said.

IDBI believes that there was considerable scope for growth in this sector and could also be complementary to its overall restructuring plans, as envisioned by the Government of India and the IDBI board.

IDBI chairman P P Vora had announced the intention of the financial institution to make a foray in housing finance when he took over in 2001.