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Affordable Housing – Way Ahead? MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table Pictured: Anandgram Project, Yevat, Pune

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Page 1: Affordable Housing – Way Ahead? MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table October 7, 2011 | New

Affordable Housing – Way Ahead?

MICRO HOUSING FINANCE CORPORATIONHousing Finance: The Emerging ContoursCAFRAL & NHB Round Table

October 7, 2011 | New Delhi Pictured: Anandgram Project, Yevat, Pune

Page 2: Affordable Housing – Way Ahead? MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table October 7, 2011 | New

CONTENTSOur CustomerOur ProductOur Projects

Our TechnologyCurrent Status

ChallengesPartnershipsContact Us

Pictured: Worli Village Slums, Worli, Mumbai

Page 3: Affordable Housing – Way Ahead? MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table October 7, 2011 | New

A Typical MHFC Customer:

• Average MHI: Rs. 8,000 to 20,000

• Primarily employed in the informal sector

• Average HH Size: 5

• Households with multiple earning members

• Currently living in rental housing or illegal tenements

• Aspiration to own their own homes

OUR CUSTOMER

Pictured: MHFC customer Badri Thakur at Fanaswadi, Mumbai

Page 4: Affordable Housing – Way Ahead? MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table October 7, 2011 | New

Salient Product Features:

• Loan Size: Up to Rs. 10,00,000

• Loan to Value Ratio: 80%

• Loan Term: up to 15 years

• Interest Rate: 12% to 14% (reducing)

• Security: mortgage of the house being financed

• Covenants: bank account / ECS

OUR PRODUCT

Pictured: MHFC Customer, Ibrahim Shaikh in Colaba, Mumbai

Page 5: Affordable Housing – Way Ahead? MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table October 7, 2011 | New

MHFC currently has an active presence in over 45 projects across

Urban India:

Mumbai

Pune

Nagpur

Surat

Ahmedabad

Indore

Kolkata

OUR LOCATIONS

Page 6: Affordable Housing – Way Ahead? MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table October 7, 2011 | New

OUR TECHNOLOGY

Pictured: MHFC customer Kailash Naikwade in Sadashiv Peth, Pune

High Investment in Technology:

• Enhance credit quality Use intelligent business software Create customer information

banks Analyze in-house / acquired

customer data (telecoms) to extrapolate and make credit decisions

• Reduce operating costs Set up efficient disbursal systems RTGS, ECS payments, mobile

telephony platforms

Page 7: Affordable Housing – Way Ahead? MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table October 7, 2011 | New

Pictured: MHFC customer Chandrakant Kharvi in Bhayendar, Mumbai

CURRENT STATUS• NHB COR received in February 2009

• Capital : Rs. 36.5 crores

• Commenced operations in June 2009

• Total Applications Received: 1332

• Total Loans Sanctioned: 1118

• Total Amount Sanctioned: Rs. 45.39 crores

• Average Loan Size: Rs. 4 lakhs

• Number of Approved Projects: 45

NB: All numbers updated as of October 5, 2011

Page 8: Affordable Housing – Way Ahead? MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table October 7, 2011 | New

• Customer Challenges

• Builder Challenges

• Policy Challenges

• Regulatory Challenges

CHALLENGES

Pictured: MHFC customer Bharat Sharma in Meghdoot Nagar, Indore

Page 9: Affordable Housing – Way Ahead? MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table October 7, 2011 | New

CHALLENGESAwareness & Self Exclusion

• Lack of awareness on affordable housing options and formal housing finance

• Ineligibility self exclusion from seeking housing options

• Solution: Increase awareness via on-ground marketing & partnerships

Decision Making• Longer decision making time crowding out• Solution: Allow booking / reservation of pre-

approved flats on behalf of customer

Collection Mechanisms• Banks are expensive collection mechanism

options• Solution: Mobile repayments via mobile

wallets / platforms

Pictured: MHFC customer Rahul Singh in Boisar, Thane

Customer

Page 10: Affordable Housing – Way Ahead? MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table October 7, 2011 | New

CHALLENGESLower Construction Costs

• Functional construction design• Cost-effective construction materials• Improved use of technology• Speed of construction

Approach to LIG Housing Construction

• Project and Assembly-line approach to construction

• Land as working capital vs land as appreciating asset

• Access to project finance to create ready-for-sale units

• Reducing approval times

Pictured: Vaishnavi Sai Complex in Virar (E), Mumbai

Builder

Page 11: Affordable Housing – Way Ahead? MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table October 7, 2011 | New

CHALLENGES• Automatic SARFAESI clearance for all

housing finance companies• Long term credit guarantee• Increase market capital available in

affordable housing finance sector through commercially viable solutions like:a) Refinance– Better terms for smaller ticket size

loans, including more liberal coverage ratio

– “Urban + Small Ticket, similar to rural refinance

– Cheaper and more easily availableb) Priority Sector Definition– Current definition: < Rs. 20 lakhs– Proposal: additional benefits for

< Rs. 5 lakhs

Pictured: MHFC customer Jalinder Mhoprekar in Crawford Market, Mumbai

Regulatory

Page 12: Affordable Housing – Way Ahead? MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table October 7, 2011 | New

CHALLENGES• Past vs. Future Financing

Loans sanctioned based on past disbursals instead of futureSolution: disbursal milestones

• Financing TermsCurrent: based on creditworthiness of owners vs. businessSolution: based on business model & cash flows

• Develop Long Term Debt MarketsCurrent: only short term financing (5 yrs) available vs. customer repayments over 15 yrs asset liability mismatchSolution: direct access to ECBs or through the NHB

Pictured: MHFC customer Chandrakant Kharvi in Bhayendar, Mumbai

Financial

Page 13: Affordable Housing – Way Ahead? MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table October 7, 2011 | New

PARTNERSHIPS• Banks

- Identify customers- Service customers- Customer referrals (two-way)

• NGOs & MFIs- Share customer information- On-ground marketing / awareness

• CorporatesSpreading the word among employees that fall within our customer segment (contracutal and non-contractual)

• TelecomsCustomer databases

Pictured: MHFC customer Shankar Khatawat with his family in Yavat, Pune

Page 14: Affordable Housing – Way Ahead? MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table October 7, 2011 | New

Micro Housing Finance Corporation# 3 Victoria Building, 1st FloorSA Brelvi Marg, Off Horniman CircleFort, Mumbai 400001

Tel: (022) 2266 0130 or 0427Email: [email protected]: www.mhfcindia.com

CONTACT US

Pictured: MHFC customer Laxman Thorat in Crawford Market, Mumbai