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DESCRIPTION
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Outline
• Why Housing Finance ?• How to Expand Housing Finance• World Bank Strategy, Products• IFC Strategy, Products• Challenges for the World Bank Group
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Why Housing Finance?
• Engine of equitable economic growth • Key for investment, households wealth, savings, consumption, labor
markets, fiscal returns, retirement system• Collateral to unlock capital (“dead” housing assets, De Soto)• ECA housing stock privatization: > $ 1 trillion (asset rich, cash poor)
• Meet a growing housing demand (urbanization, demographics)
• Prevent slum proliferation (cities built the way they are financed)
• Reduce poverty (asset building, retirement, empowerment, community strengthening, improved living conditions)
• Take part in the financial sector liberalization (banks, non bank lenders, domestic bond markets, pension funds, etc.)
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How to build inclusive and sustainable HF system?
• Sizeable & durable investment that needs debt leverage
• Required sound foundations• Relative macroeconomic stability• Workable legal system (titles, foreclosure)• Risk management, funding tools & regulations• Competing private lenders• Affordable housing (cf. supply constraints)
• Enabling role of the State • Less of direct lender/builder, rather build conducive
market environment, catalyst role to expand accessibility
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How to Expand Housing Finance
• Products• Credit products (term, rates, amortization) • Broader distribution channels• Micro finance applied to housing• Housing saving schemes• Construction, infrastructure and rental finance
• Policy• Affordable land use & urban development rules• Efficient registration of property titles & liens• Smarter HF-related subsidies• Instruments to reallocate part of the additional risks
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Bank Project Opportunities (Loans, Guarantees, TA)
ENVIRONMENT/INFRASTRUCTURE
PRIMARYMARKET
SECONDARYMARKET
•Land use, urban development and housing policy •Property title registration and effective foreclosure•Construction quality, security and finance•Land infrastructure•Professional real estate intermediaries•Effective rental markets•Smarter subsidies
•Finance lower income housing •Safe lending regulations & standards •Consumer information & protection•Risk management tools (insurance, guarantees)•Micro finance, housing savings, Islamic finance•Capacity building & funding of lenders, insurers
•Choice of proper model (s)•Legal and regulatory framework•Access to longer-term matched funding•Take off funding or guarantee support
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IFC Programmatic Approach
Legal/Regulatory Property
Rights/Foreclosure
Building Viable Mortgage Markets in Emerging Market Economies
Macroeconomic Stability
local currency
Role of Gov.
Financial Sector Dev.
Securities markets
Pension Funds
Investment Technical
Assistance and
Information Building
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IFC Investment Products
CAPITAL MARKETS
MORTGAGE FINANCE
CONSTRUCTION FINANCE
Debt:
Credit Lines
Warehouse Credit Lines
Liquidity Facilities
Equity:
Conduits
Mortgage Ins.
Servicing Co.
Originators
Structured Finance:
Credit En.
Risk Sharing
Capital Markets
Mortgage Finance
Construction Finance
Land Finance
In. R
isks
… investments at different levels in the value chain given the risks
IFC
Developer-cum-mortgage originator Home Buyers
Security Vehicle
Securitization
Phase II
Phase I
Credit Line
Mortgages
Collateral for IFC
Mortgage Warehouse Line (for a Developer cum Originator)
Local Mortgage Market
International Finance Market
Local Capital Market
Institutional Investors
Trustee
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IFC: the Challenges for the Future
• How to get to true poor? (“The case of Mexico”)
• Microfinance for housing; and • Remittance mortgages
• Impacting the supply side
• Increase house production via developer financing• Ensure affordability
• Creating new products/relationships to expand impact
• Access to long term local currency (NCPIC program)• Islamic housing finance• Energy efficiency products• Mortgage finance provided by sub-sovereigns
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World Bank Group Role
• Develop housing finance markets • Set up infrastructure, legal and regulatory framework for markets• Make housing markets more affordable & secure property rights• Develop framework for risk management and funding tools• IFC to support private transactions
• WBG comparative advantages• Honest broker role• Long-term presence during a process of reforms• World expertise & knowledge transfer • Integrated approach: urban & finance, public & private sectors