Affordable Housing Key Macro Ini7a7ves Required FINANCE. P H Ravikumar

Transcription

1 Affordable Housing Key Macro Ini7a7ves Required FINANCE

2 Background Numbers to highlight poten7al: Housing For All by 2022 requires construc?on of 110 million units. Investment requirement of : USD 250 Billion every year from now to 2022 Current Investment growth in Housing is 6%; required growth rate of investment is about double i.e. 12 to 13% 70% demand concentra?on in 9 states (Maharashtra, Madhya Pradesh, Karnataka, Tamil Nadu, Andhra Pradesh (including Telangana), Rajasthan, West Bengal, U[ar Pradesh and Bihar. Housing Needs and potential for retail 2inanciers: Par7culars Urban (Crore Units) Rural (Crore Units) Total (Crore Units) C u r r e n t Housing Shortage Required housing Units by 2022 Total Need Funding Gap: Even at growth rate of 45% there would be an estd gap of Rs.56 Lakh Crore towards retail funding in the affordable housing space

3 Key Sector Requirements (1/4) Sector Requirement Current Status Recommenda7on Effect Governing Acts Mul?ple acts covering selling, construc?on and aliena?ng property Harmonize approach by merger of acts. Model act can be drawn by Central Govt. and individual state Govts can adopt the contours of the act Clarity in legal structure for lender and borrower Credit/Risk premium over property would reduce Availability Of Land Most cri?cal as development process takes 4-6 years Land iden?fied by state bodies and private builders Central and State Govts to iden?fy land under their and their undertakings control. Par?cularly in the nine states Greatly Helps in reducing lead?me

4 Key Sector Requirements (2/4) Sector Requirement Property Title Current Status Recommenda7on Effect Available at the Registrar s office Title of property to be made available online and access made available to public An authority to be made which would guarantee the?tle of the person Increase clarity and transparency Will increase transac?on volumes just like de materializa?on increased depth in capital markets Approval for Construc?on Mul?ple approvals required Single window approval with deposi?on of all documents and approval process to be made online Layouts, ameni?es, facili?es to be standardized for quick and easy approval especially for affordable housing homes FAR/FSI guidelines to be revised Single window, online deposi?on of documents etc. help eliminate corrup?on which roughly contributes Rs.1,200 to 1,800 per Sqk on cos?ng basis Revision of FAR/FSI would help in developing exis?ng structures

5 Key Sector Requirements (3/4) Sector Requirement Current Status Recommenda7on Effect Stamp Duty and Registra?on Process No Differen?a?on Concessional stamp duty levels and processes would help this segment and sector. Changes in Financial requirements and related aspects EWS income defined at Rs.3 Lakhs P r e - p a y m e n t penalty Nil EWS income defini?on levels to be revised upwards ; case in point being RBI raising the income thresh hold for micro finance borrowers. The EWS/LIG segment predominantly catered to by HFCs. Post establishment of track record it is expected that these customers would migrate to banks; prepayment penalty to be allowed to support HFCs/MFIs Will help Govt. benefits a wider and intended set of audience Help maintain interest and generate fresh interest amongst companies opera?ng in this segment

6 Key Sector Requirements (4/4) Sector Requirement Contd.. Iden?fy Cri?cal target areas Current Status Recommenda7on Effect Re-finance restric?ons; par?cularly spread restric?ons PSL onward lending cap of Rs.10 lakhs Onward lending exposure limits cap at 5% Interest rate spreads to be enhanced as opera?ng costs are high also this segment is predominantly considered sub prime by ra?ng agencies thus affec?ng HFCs Cost Of Borrowing Onward lending limit of Rs.10 Lakh per borrower for HFCs to be brought in line with Bank direct lending limit for PSL classifica?on. Onward lending exposure cap to be increased/ removed for be[er policy transmission NHB to iden?fy districts and allot them to banks/hfcs; NHB to push HFCs to lend in these districts Increased interest rate spreads would make refinance lines more a[rac?ve Would help in increasing banks interest in this sector. Would help in increasing banks interest in this sector Will help pick up in the affordable housing segment

7 Recommenda7ons for Macro Level Ini7a7ves For Achieving Policy Level Goals

8 Recommenda7ons (1/4) Leasing: A defined percentage of Houses say 20% in the affordable housing space to be allowed to be bought by investors which later would be leased to intended income groups Prac?ce carried out in Netherlands a century ago helped in increasing affordable housing penetra?on Effect of Demone7za7on: As Cash has become a no go area NHB to take pro ac?ve measures to allow HFCs take strategic equity in payment banks/ digital wallet companies and vice versa Migra?on of collec?on of due via banking channel Investment: NHB to consider working with MoF and regula?ng en??es of investors to mandate that a certain % of their inves?ble corpus to be directed to HFCs in general and affordable housing in par?cular

9 Recommenda7ons: (2/4) Technology: NHB to encourage establishment of a pan industry tech company to support digital origina?on, tech driven processes and data analy?cs CERSAI to be moved under NHB for single point control of registry rela?ng to property details and the charges on the property NHB as a market maker: To promote liquidity of debt instruments issued by HFCs-NHB could work or partner with a securi?es trading from to act as a market maker Guarantee trust Company: Large segment of customers are unable to access funding due to weakness in?tle chain documents; proper?es with limited or no approvals legally required in place but possession has been with current occupier for decades. Guarantee Trust company where NHB is joint owner is an ideal vehicle to credit enhance legal ownership of such cases

10 Recommenda7ons (3/4) PSL defini7on Alignment Product Innova7on: Approved market par?cipants allowed to write op?ons on long term leases for homes; with pre defined structures set so that borrowers can purchase the home aker 5/8/10 years. Possibility that real estate assets might be housed in HFCs balance sheet; task force to be appointed to look at risks, capital needs and likely benefits Minimum Capital Funds: Minimum capital requirement of HFCs to be raised from current Rs.10 Crore in order to enable HFCs borrow at compe??ve rates. HFCs unable to meet renewed capital requirements to be migrated to localized micro lending segments so that there is geographic focus ; lower?cket size and hence lesser perceived risk

11 Recommenda7ons (4/4) Credit Enhancement: Credit enhance HFC pormolio for securi?za?on or credit enhance HFC s directly in order to allow HFCs lower their overall cost of borrowing Strengthening of NHB: Lateral recruitment to be encouraged Net worth to be increased to bring it in line with overall HFC market size Co opera?ve credit socie?es extending benefit to affordable housing customers to be brought under the ambit of NHB

12 FINANCE COMMITTEE MEMBERS Mr. Ravikumar Puranam Chairman Vastu Housing Finance Corpora?on Limited, non-execu?ve a member of the Board of Directors of Bharat Financial(formerly known as SKS Microfinance Limited) currently also serves on the Boards of several leading corporates, including the of Bharat Forge Limited, L&T Investment Management Co. Ltd., UTI Re?rement Solu?ons Ltd., BOB Capital Markets Ltd., Aditya Birla Capital Advisors, Escorts Ltd. and others Mr. Siddharth Khandekar Siddharth Khandekar is an account manager with Waarborgfonds Sociale Woningbouw, the Na?onal Guarantee Fund of the Dutch social housing sector. Before this, Siddharth worked as a management consultant with Deloi[e Real Estate Advisory in the Netherlands advising real estate developers, social housing corpora?ons and city governments on publicprivate-partnerships. Mr. Harsh Vardhan Partner and Director at The Boston Consul?ng Group Mr. Rajnish Dhall MD and Co - founder, Micro Housing Finance Corpora?on Limited Member off the Advisory board of Aangan an NGO which works with Children in State Run Children Homes and Umeed a Mumbai Based NGO which works with children with developmental disabili?es. INPUTS P. Jayendra Nayak Ex IAS officer with more than 25 years of experience in India s financial service space; Ex- Country Head for Morgan Stanley; Ex Chairman and CEO of Axis Bank; Chaired the commi[ee on Governance of Bank Boards, cons?tuted by Reserve Bank OF India 12