NHB-APUHF-APMCHUDInternational Conference on Housing: An Engine for Inclusive Growth
Session IV:Housing Challenges: International Financial Institutions’ Perspective
Christine EngstromPrivate Sector Operations Department
Asian Development Bank
New Delhi, IndiaApril 11-12, 2013
2Asian Development Bank
Asia’s Acute Housing Shortages
Large housing shortages throughout Asia:
India: approximately 25 million for urban areas;
Philippines: 3.75 million shortage from 2005-2010 (Source: HUDC); and
Indonesia: approximately 3 million backlog with a need to add about 800,000 per annum (Source: Ministry of Housing).
Nearly half of all slum dwellers live in Asia with South Asia having highest rates. Approximately 70% of Bangladesh’s population lives in slums.
Continued pressure on housing. Asia is the fastest urbanizing region in the world.
ADB estimates that 120,000 new residents will move to cities each day over the next 10 years.
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The Affordability Challenge
Affordability is increasingly a problem in Asia impacting lower and middle-income classes.
Price-to-income ratios in Asia exceed those of developed countries:
Jakarta = 14.6x;
Dhaka = 16.7x; and
Lahore = 23x (Source: U.N. Habitat).
Drivers of low affordability:
Escalation of property costs;
Increase in costs of building materials;
Slowing growth of wages in some markets; and
Underdeveloped housing finance markets high interest rates and down payments, and transaction costs.
Asian Development Bank
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Initiatives to Address Affordability Issues
First mortgage guarantee company in India. Funded in June 2012.
Provides guarantees against borrower default on interest and principal payments up to a specified amount.
Public-Private Partnership. Benefits from strong shareholders:
- National Housing Bank (38%) – Sponsor and government entity;- Genworth Financial (36%) – Strategic investor and technical partner;- Asian Development Bank (13%) – Investor; and- International Finance Corporation (13%) – Investor.
Genworth Financial is providing transition services to IMGC in areas such as risk management, underwriting, and IT, amongst others.
Ratings: CARE (AA+), ICRA (AA).
India Mortgage Guarantee Corporation
Asian Development Bank
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India Mortgage Guarantee Corporation
Initiatives to Address Affordability Challenges
Long-term contributions to the market:
Helping people access homes earlier.
Addressing gaps in the housing and housing finance markets.
Strengthening the financial sector:
Creating new products;
Helping banks tap new markets;
Diversifying risk; and
Providing capital relief.
Supporting growth of capital markets.
Providing data and feedback on the market to industry and regulators.
Asian Development Bank
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Long-Term Funding and Technical Assistance
Initiatives to Address Affordability Challenges
Longer-term funding:
Fills funding gap for banks. Capital markets are typically underdeveloped;
Helps banks to extend longer-tenor loans hence improving affordability; and
Reduces asset liability mismatches.
Technical Assistance:
Strengthen mortgage underwriting and servicing;
Create new models for assessing risk from lower income/informal borrowers;
Better portfolio management; and
Help banks to provide new products for broader customer segments.
Asian Development Bank
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Microfinance
Initiatives to Address Affordability Challenges
Using microfinance institutions to help lower income borrowers:
Incremental building or home improvement loans;
Typically for existing customers with good repayment histories; and
Improves affordability.
Potential to scale-up:
MFIs need training;
Funding sources for MFIs can often be limited.
Asian Development Bank
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Focus on the Fundamentals
Initiatives to Address Affordability Challenges
To address affordability issues and to support inclusive growth in the housing markets, important to focus on the fundamentals:
Foreclosure processes;
Access to land;
Efficient and effective titling and registration;
Strong underwriting and servicing standards; and
Industry information and transparency.
Asian Development Bank
