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8/7/2019 Housing Microfinance NHB's Initiative

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Housing Microfinance:NHBs Initiatives

P.R.JaishankarAssistant General Manager

National Housing Bank


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PRESENTATION STRUCTURE

Housing: An Agent for Financial Inclusion

Housing and Housing Finance

Housing Micro Finance: Role of NHB

Housing Micro Finance: NHBs Experience


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HOUSING: AN AGENT FOR FINANCIAL INCLUSION

Housing has direct impact on employment andincome generation - An engine for Equitable andBalanced Economic Growth.

Impact in terms of Improved habitat, Living,Educational, Social and Cultural standards leading toHuman Capital Formation and thereby the futureIncome capabilities

Improved productivity leads to enhanced Income,

Savings and Repayment potential on sustainable lines Sustainable Human Settlement: An Effective tool

towards Financial Inclusion with FinancialStability and Social Inclusion


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HOUSING DEMOGRAPHICS


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HOUSING SHORTAGE

Housing Shortage estimate at the end of the 10thPlan:

24.7 million for 67.4 million households

Expected to increase to 26.53 million units for 75.01million households by end of 11th Plan period

99% of the shortage exists in EWS / LIG segments

Pressure on Urban Services due to Migrating populace.

Still vast non-formal segments remain un-served.


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HOUSING & FUND REQUIREMENT 2007-12

Particulars Housing Requirements (2007-12)

(in million units)

Funds Requirements (2007-12)

(in 000 crores)

R U T R U T

Additional Houses 32 16 48 344 645 989

Of which

EWS including BPL, MAPL 14 7 22 36 74 110

Upgradation of Existing Pucca/

Semi Pucca/ Katcha Houses

23 9 32 35 24 59

Total (Additional Houses +

Upgradation / Repairs etc.)

55 25 80 379 669 1048

48 million additional houses are required during Eleventh Plan Period2007-12;

There is need for diverse sources of finance and diverse financialinstruments


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Institutional Finance Emphasis on loans above Rs.5 lakhs

Source: BSR, RBI & T&P, NHB Reports

CAGR No. of Accounts - 12.3%CAGR O/s Housing Loan - 28%

Housing Finance Market is

Value Driven rather then Volume Driven

Increased emphasis on loan categories

above Rs. 5 Lakhs Trend Continuing

Increased emphasis in lending

in Metropolitan areas

Rural Housing Finance stagnant at 10%

(Source: BSR Reports, RBI)

Need to develop New Financial Architecture

forAffordable Housing

CAGR on Housing Loans of SCBs for 2000-06

2

.49

40.

4

81.

56

103.

6

14.

33

42.

38

81.

6

102.9

6

13.

2

41.

44

81.

93

105.3

3

-10

.09

-6.

15

-6.

19

-20

0

20

40

60

80

100

120

140

upto 0.25 L >0.25 L to 2 L > 2 L to 5 L > 5 L to 10 L > 10 L to 25 L

Loan slabs (Rs. in Lakhs)

CAGR(%)

Accounts Credit Limit Outstanding Loan

CAGR on Housing Loans of HFCs (2002-06)

-1.

22

6

52

-10

0

10

20

30

40

50

60

upto 1 L >1 L to 3 L > 3 L to 5 L > 5 L to 10 L > 10 L

Loan Slabs (Rs. in Lakhs)

CAGR(%)


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AFFORDABLE HOUSING

Housing is the combined matrix of following elements:

Land Supply and Management; Land Use Optimization;

Infrastructure On-site and Off-site;

Building Technology, Materials and Labour;

Finance; Equity/Capital and Borrowing

Liquidity

Profit Component;

Affordability:

A Relative Term Depends on Income/Capacity to afford the above elements.

Target Segment Affordability (Deepak Parekh Report):

Price: 4 times Gross Annual Household Income, AND

Carpet Area: upto 600 sft, AND

Rent: Upto 30% of Monthly Household Income8


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MICROFINANCE: TOOL FOR POVERTY ALLEVIATION

Emergence of Microfinance to enable institutional creditflow to the poor and replace informal credit sources

Microfinance: "Theprovision of thrift, credit and otherfinancial services and products of very small amounts to the

poor in rural, semi-urban and urban areas for enabling themto raise their income levels and improve their livingstandards

Enhance the poor households to

Increase income

Building assets

Empowerment

Active partners in development process

Reduce their vulnerability in times of economic stress


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Microfinance Sector

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Client Base: 22.6 million (2009) 13.2 million Rural; 9.4 million Urban YoY Growth 60%

Total Outstanding Microfinance Loans: Rs.35,939 crore (09) Loan Portfolio of MFIs: Rs.11,730 crore (09)

At current levels Microfinance constitutes 1.29% of Gross BankCredit of Scheduled Commercial Banks Average Loan Size: Rs.5400/- (4200/- in 2008)

38% of clients with average loan size over Rs.10,000/- Constitution:

Non Banking Finance Companies

Not for Profit MFIs (Sec 25 Co.s, Public Trusts, Societies) Mutually Aided Cooperative Societies

Market Shares: 34 NBFCs 76% of overall MF Portfolio; 133Societies -10%

Penetration: Greater in Southern Region 54% of Clients ; 58% of loans

Source: Micorofinance India: State of Sector Report 2009


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MICRO FINANCE INSTITUTIONS:EFFECTIVE DELIVERY CHANNELS

Timely and adequate credit and other financialservices to the poor at their doorstep - an edge

Credit histories of the poor borrowers

Good systems and procedures for giving andcollecting loans. Most of the MFIs have maintained recovery rates

in excess of 95%. Very few MFIs have ventured into providing

housing loans to the poor.

Need to tap the potential of MFIs which canprovide housing loans to the poor.


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NHBs STRATEGY FOR FINANCIAL INCLUSION

CUSTOMIZED FINANCIAL PRODUCT INTERVENTION:

RURAL HOUSING:

Supplementing Government Schemes

Productive Housing in Rural Areas

Financing SHGs - Partnership Approach - NGOs/MFIs/Sec.25

Rural Housing Development Fund

URBAN HOUSING:

Supplementing Govt. Schemes e.g. JNNURM Financing SHGs Partnership Approach - NGOs/MFIs/Sec.25

Slum Redevelopment and Up-gradation

Integrated Township Development Projects (PPP projects)


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HOUSING MICROFINANCE: NHBs ROLE

Focus Un-served and Under-served Housing Micro Finance (HMF)

Integrated Habitat Approach Productive, Income Generating Housing Savings-induced Housing Incremental Housing Water and Sanitation, Women oriented

Partnership approach MFIs, Community Based InstitutionsFinance, Co-finance,Capacity building,Portfolio Securitization,Equity support to Rural HFCs


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NHBs HMF KEY FEATURES

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Amount of

Loan

Generally 2 to 7 times larger than average micro-credit loans

Loan Term 2 - 5 years for improvement and up to 10 years for fresh

construction

DeliveryChannel

Framework

Housing Micro Finance Institutions Non Government Organizations

Societies registered underSocieties Registration Act, 1860 Section 25 Companies

Any other institution approved by Govt. / RBI forpurposes

of undertaking microfinance

Security /Collateral

Hypothecation of Book debts Agreement to mortgage

Groupguarantee of SHGs

Otherforms of security like FDRs, etc.

Wherevertitle deeds are available, they are mortgaged.


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Selection of

borrowers

Poor people (in Urban and Rural areas) with means of

repayment like artisans, craftsmen and people in the

informal sector. Should have completed atleast 3 loan

cycles successfully with MFI.

Co-Financing

MFIs

A productive loan may also be extended by MFIs (as co-

finance) to enhance repayment capacity.

OtherSalient

Terms

MFI Borrowers to on-lend to SHGs.

Trackrecord forwith MFI borrower.

Members of SHGs to have successfully completed atleast

three loan cycles.

HMF KEY FEATURES


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HMF: RISKS AND MITIGANTS

Risks: Affordability of Borrowers Viability of MFIs Limited access to medium and long term funds Insecure land tenure

Requirement of high element of savings Difficulty in obtaining Group GuaranteeMitigants:

Proper selection of clients Seasoned clients

Flexible funding mechanisms

Insistence on Standard Corporate Governance of MFIs Need for co-ordination between formal credit institutions to

mitigate geographical concentration risks

Capacity building Training, Research and Development

Use of information technology & Micro insurance


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NHBSIGNIFICANCE OF HMF

Creation of Assets

Enhanced Social Security

Increased Productivity

Increased Bargaining Capacity

Increased Volume of Business

Saving in Recurring Expenses

Providing Sustainable Employment

Women Empowerment


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NHBs INITIATIVE

NHB has experience in HMF on pan India basis.

Leading Micro Finance institutions across the countryare partnering with NHB for rolling out HMF

programmes for their members. Financial support is provided on self sustainable lines.

Composite loan products are being promoted toimprove the viability of the programme by helping in

increasing income of beneficiary. Separate Water and Sanitation component in the

housing has been included to improve penetration ofsanitation facilities.


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NHBs Partnership with UN Habitat

NHB and UN Habitat have signed Agreement ofCooperation for collaborating in the field of waterand sanitation in India.

Delivery of credit to targeted segments at relativelylow interest rates for water and sanitation facilities isenvisaged through the Micro Finance Institutions andUrban local Bodies.

Typical HMF loan under this programme to have twoparts

Housing loan for construction / repairs /upgradation / incremental housing (at competitiverates) - with NHB funds

Loan for water and sanitation facilities (atsubsidized rates) - with UN Habitat support


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(Rs. in Crore) Sanctions Disbursements Houses

Rural 33.55 17.80 6289

Urban 48.12 11.88 9318

Total 81.67 29.68 15607

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5.25

3028.3

2.6 2.49

20.41

0

10

20

30

40

2006-07 2007-08 2008-09

NHBs FINANCIAL ASSISTANCE TO HMF

Madurai, TN

Mumbai, Maha

Warangal, AP


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NHBs HMF STATE-WISE

S.No State Sanction Disbursements Houses

1 Andhra Pradesh 24.55 8.07 2801

2 Assam 0.30 100

3 Gujarat 10.00 0.30 1300

4 Karnataka 14.00 10.89 2475

5 Maharashtra 5.82 3.16 147

6 Orissa 7.00 4.50 1085

7 Tamil Nadu 19.00 2.26 7576

8 Kerala 1.00 223

Total 81.67 29.68 15607

(Rs. in Crore)

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SHG housing at Tirupati, Andhra Pradesh

A house before sanction of NHB loan

A house after construction aided by

NHB loan


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NHBSlum Rehabilitation Project, Mumbai

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A house constructed in Madurai A house constructed in Sivaganga

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Tamil Nadu

House in Pudukottai House in Sivaganga

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House constructed in Warangal (AP) House Constructed in Hanamkonda (AP)

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A Few Toilet Designs

Toilet designs under implementation by one of the

MFI partners of NHB27


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HOUSING (MICRO)FINANCE: IN SUM

Vast untapped market Urban and Rural Market based inclusive finance feasible, and Requires range of:

Customized financing products, Risk mitigants, Securitization Viability gap funding (in certain segments), Specialized Delivery systems,

Dedicated Financial intermediaries, Capacity building

An entirely Specialized financial architecture forHousing Microfinance


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NHBs MARKET DEVELOPMENT ENDEAVOURS TOWARDSCREATION OF APPROPRIATE FINANCIAL ARCHITECTURE

Risk MitigationMortgage Credit Guarantee

Title IndemnityCredit Guarantee Fund

Securitization: Creation of Secondary Mortgage MarketLiquidity and Credit Enhancement

Other MeasuresCapacity building Training, Research and Development

A Specialized HMF Corporation

Equity Support

Facilitating Regulations

THE WAY FORWARD


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Thank You

Visit us at : www.nhb.org.in

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