karnad_renu
TRANSCRIPT
-
8/8/2019 karnad_renu
1/7
RESPONSIBLE HOUSING LENDING:
BRICKS FOR THE BUCKS
THE INDIAN EXPERIENCE
RENU SUD KARNADJOINT MANAGING DIRECTOR
HOUSING DEVELOPMENT FINANCE CORPORATION LTD - India
RESPONSIBLE DEVELOPMENT FINANCE
FRANKFURT FORUM 2008FEBRUARY 22, 2008
-
8/8/2019 karnad_renu
2/7
2
High demand growth driven by: Improved Affordability
Rising disposable income
Lower interest rates
Tax incentives (interest and principal repaymentsdeductible)
Increasing Urbanisation
Currently 28% of Indian population is urban
Favorable Demographics
Median Indian age is 25 years
Rapid rise in new households
Acute housing shortage estimated at 24.7 million units Low mortgage penetration
Key players: Banks and Housing Finance Companies
Housing Finance in India
-
8/8/2019 karnad_renu
3/7
3
Lending Operations of HDFC Incorporated in 1977 as the first specialised mortgage company
in India
Cumulative Loan Disbursements : US$ 35.9 bn
Cumulative Housing Units Financed : 3 million
Loan Characteristics (for HDFC)
Average Loan Size : Rs 1.25 mn (approx US$ 31,700) Average Loan to Value : 63% (at origination)
Average Loan Term : 13 years
Primary Security : Mortgage of property financed
Customer Profile : Typically first time home buyers
: Average age - mid 30s
: Middle-class, salaried employees
-
8/8/2019 karnad_renu
4/7
4
Housing Finance for Low Income Clients Following its 10th year of operations, HDFC created a Shelter
Assistance Reserve wherein a portion of profits are transferredeach year for participating and supporting social initiatives
In 1989, HDFC accessed low-cost funds from KfW to expandlending operations to economically weaker section (EWS)households.
HDFC partners with NGOs having grass-root level involvementto identify families with genuine needs.
This collaboration has enabled HDFC to:
construct quality houses at lower costs (without contractors)
demonstrate high recovery rates offer small sized loans for repairs & upgradation
emphasis on self-help approach where the borrowers
contribute locally available building material and labour Focus is on providing housing + income generating activity
-
8/8/2019 karnad_renu
5/7
5
Challenges of Low Income Housing Rapid urbanisation has created jobs in cities leading to
migration from rural areas. But adequate housing
facilities/infrastructure have not been provided resulting inproliferation of slums/squatters.
Archaic land policies
Supply side restrictions have led to land price distortionse.g. restrictions on FSI, development control regulations
Lack of a developed rental market
Lack of clarity on land titles Financial inclusion still a challenge - low formal sector
financial penetration with strong presence of the
moneylender, charging usurious interest rates Subsidised/free housing political hot potato
-
8/8/2019 karnad_renu
6/7
6
Recent Initiatives Repeal of Urban Land Ceiling and Regulation Act (ULCRA)
in most states
Credit Bureau information building up
The Reserve Bank of India has put out guidelines forestablishing Mortgage Guarantee Companies
Central government is providing funds to states for urban
renewal and infrastructure development. Funds are releasedbased on reforms implemented at the state level.
Efforts being made to redevelop slum settlements. Eg.Dharavi
Recognition that the micro finance sector is profitable.
Attracting huge capital, both debt and equity from venturecapitalists, banks, corporates.
Global players expected to invest US$ 3 billion in microfinance in India by 2010
-
8/8/2019 karnad_renu
7/7
7
Reaching the Bottom of the Pyramid
Need to stipulate that all new housing projects should have afixed percentage allotted for low income housing
Integrate delivery of services - water supply and sanitation,health care, education and access to livelihood
Policy initiatives to increase the supply of land
Incentivise developers to build rental accommodation or low
cost housing Encourage public private partnerships for low income housing
Standardise norms for low cost, ecological construction
materials Initiatives to lower cost to the end consumer such as reduced
stamp duty
Government has set up a high level task force on AffordableHousing for All