Presentation Structure

Transcription

1 Housing Finance in South Asia,,J Jakarta May 27-29, 29, 2009 Low Income Housing Finance R. V. Verma National Housing Bank India

2 Presentation Structure I. General Economic Trends II. Trends in Housing Finance III. Challenges in Low- Income Housing IV. Role of Agencies V. Institutions and Products VI. Summing Up VII. Way Forward and Conclusion 2

3 General Economic Trends 3

4 Indian Economy- State of Transition Market Oriented Financial Systems Shift towards Market-based Approach GDP Growth rate % 9.6% 9% 6.6% 5.7% GDP ( ) : Rs trillion at current prices (AE) Sectoral growth Share of sectors Agriculture 2.6% 18% Industry 4.2% 19% Services 9.2% 63% (Source : RBI) Trends in Growth 4

5 Some Financial Sector Indicators CRR 5% Bnk Bank Rate Rt 60% 6.0% Repo Rate 4.75% Reverse Repo Rate 3.25% Inflation April 2009 Week ended ddmay 02, % 0.48% Trends in Policy Rates 5

6 Demographic Profile Population: 1.03 billion (2001 Census) Rural Population : 0.74 billion (72.2%) 0-5 years 11% 5-14 years 24% years 19% 54% of the population aged 24 years & below 35 million plus cities (metros) constituting 39% of urban population Urbanization & Housing Challenges Projected level of urbanization at 50% by the year

7 Trends in Housing Finance 7

8 Housing Finance Market: Growth Story Housing Loans outstanding 7.25% of GDP Positive demographics & incomes Supportive Regulatory/Fiscal Policies Financial Deepening Supply Responses: Demand Driven Challenge for Low Income Housing 8

9 Trends in Housing Finance Banks share increased from 31% in to over 60% in HFCs share decreased from 69% in to about 38% in Aggressive lending Main beneficiaries - salaried class, professionals and tax payers Affordability and Accessibility major challenges for the lower income population 9

10 Trends in Lendings for Housing 3, Housing Finance Disbursals (INR in billion) USD 30 billion 2, ,450 2, ,288 1,101 Total 1, HFCs 860 Banks 1, * *Estimates 10

11 Housing Loan Outstanding (Rs./billion) USD 79 billion Total Banks HFCs * *Estimates 11

12 Retail Portfolio of Banks % 46% Housing 35% 44% Consumer Durables Credit Card Receivables Auto Loans 17% 4% 1% Other Personal Loans 15% 5% 1% Retail loans constitute ~25% of loans and advances of SCBs Mortgages constitute 44% of the retail loans portfolio Lending for housing by Commercial Banks as percent of gross credit outstanding tt up from about 4% in 2001 to ~11% in

13 Challenges in Low- Income Housing 13

14 Issues in Low Income Housing Rapid growth in housing sector has bypassed Low-Income Households Demand Identification Risk Perception Price Rise, Growth, Stability, Interest Rates - Impact on Low Income Housing Role of Statet Governments & Public Housing Agencies Market/Subsidy based Approach 14

15 Issues in Financing Low-income households do not have access to housing credits Cannot contract debts on terms of the financial market Unstable income and unstable cash flows High risk & high cost - to - service customers Role of NGOs/MFIs as Intermediaries Role of Guarantee/Risk Fund Role of Government & Financing Institutions in Market Environment 15

16 Supply Constraints Competing Demand on Land and Finance Land supply is constrained: Land availability Land use rules Efficient use of Land Title and Tenure Finance Flow Constrained Stability Growth Risk Perception Need for Integrated Approach 16

17 Affordability Issues Financial Sector Issues Project Finance Individual Loans Supply of Funds Cost of Funds Whether market based solution? Real Sector Issues Land Supply Cost of Land Land market functioning Infrastructure provision Construction & Delivery Role of Public & Private Sector Subsidized Housing Credit Subsidized House Prices 17

18 In Other Words Supply Side Land Acquisition Infrastructure Provision Sale of Land Housing Construction Housing Sale Role of Public Agencies/ Developers Credit Delivery Demand Side Purchase Price Income Level Affordability Loan eligibility Subsidy component Risk Mitigation Role of NGOs/MFIs Demand Aggregation Ensuring access to housing with infrastructure at affordable prices 18

19 Unlocking Land and Finance Unlocking the Value of Land Security of Tenure/property rights State Financing through State Funds/Subsidies Municipal Funding Institutional Finance Creation of Special Funds with ihfiscal support 19

20 Contd./- Private Capital and Public Objective Fiscal Support for Construction and Financing Governing Land and Basic Services Service provisions Incentives for savings and payments 20

21 Challenges Formal sector accounts for only 25% of the total investments in housing; skewed distribution of credit Affordability and security ; perceived higher risk Financial assistance through informal sector at nascent stage Subsidized housing programmes: limitations Targeting and sustainability of such programmes 21

22 Challenges Housing the urban poor Market s limitations Funding against security Creation of security Formal and informal sectors are still compartmentalized t Demand aggregation, g demand registration, intermediation and risk mitigation 22

23 Role of Agencies 23

24 Search for Synergies Limitations of market based funding and subsidized funding Partnership Approach : Public/Private/Community Innovative instruments for benefit of All Incentives for Low Income Housing Credit Incentives for Low Income Housing Construction 24

25 Institutional Stakeholders Real Sector Central Government Policy Policy & & Programmes Programmes Financial Sector Facilitator & Enabler State/Local Governments PUBLIC PRIVATE Partnership Financial Institutions Instns & Products Formal Sector Informal Sector 25

26 Policy Reforms Policies for addressing existing slums Policies for potential slums Supply issues Land Allotment Infrastructure Role of State Government and Public Agencies in supply side interventions Role of Financial Institutions in financing Incentives for builders and financiers 26

27 Institutions and Products 27

28 Risk Mitigants Risk Perception long term lending Guarantees/Group Guarantee Insurance Livelihood Loans (Generation of economic activities to supplement loan recovery) Role of Self Help Groups Special Guarantee/Risk Funds 28

29 Sustainable and Inclusive Housing Government Initiatives - Social & Financial Inclusion Jawaharlal l Nh Nehru National Ub Urban Renewal Missioni (JNNURM) launched in December 2005 Seeks to activateate the supply chain Connecting Land with infrastructure and housing Ensuring sustainability through Reforms Expanding capacity of the sector Leveraging Reforms through Funding Basic Services for the Urban Poor (BSUP) & Integrated Housing and Slum Development Programme (IHSDP) 29

30 BSUP and IHSDP BSUP seeks to provide 7 entitlements/services security of tenure affordable housing water and sanitation health education social ilsecurity in low income settlements in 63 Mission Cities IHSDP seeks to provide the aforementioned 7 entitlements/services in towns/cities other than Mission cities 30

31 Contd./- Project Amount : Rs.5,00,000 million (USD 10 billion) Shared Financing: Centre/State/Local Agency Agenda of Reforms: Universal access to a minimum level of services Provision of basic services to urban poor Introduction of system of e - governance Reform of property tax Rationalization of Stamp Duty 31

32 Interest Subsidy Scheme for Housing the Urban Poor (ISHUP) Need to provide Affordable Housing for All ISHUP for low income housing in urban areas Providing home loan with Central Government subsidy to lower income groups Subsidy of 5% for an loan amount of Rs.1,00,000 for a period of 15 to 20 years 32

33 ISHUP (Contd./-) The Net Present Value of the subsidy over years deducted upfront from the Principal amount Loan repayment period permissible 15 to 20 years Partnership Approach: Individual/State/Local Bodies/Banks -Beneficiary i di driven Leveraging Institutional Funds 33

34 Rural Housing Golden Jubilee Rural Housing Finance Scheme (GJRHFS) launched din ; Market based Implementation through lending institutions with NHB as the monitoring agency allocation of annual targets Around 3.5 million dwelling units financed since inception Support from NHB Refinance assistance - concessional finance Technical assistance & capacity building 34

35 Rural Housing (contd./-) Centrally sponsored subsidy scheme; cost sharing between Centre and States 75 : 25 basis; poorest segment in rural areas Government s new thrust on rural infrastructure Bharat Nirman Programme Construction of 6 million houses over a four year period from Rural Housing Fund Out of shortfall in priority sector lending by Banks; administered by NHB 35

36 Going Forward Design different instruments & strategies for different market segments - to include financial/ housing products Risk Mitigation Products & Institutions Credit Supply vs. Land/Housing Supply Fiscal & Regulatory incentives 36

37 SPV Model- Supply side Intervention Stand alone and project - specific Approach; Well defined project objective Well defined target group implementation Co-mingling is avoided; Generates synergies among partners High visibility; Encourages lenders Improves credibility 37

38 MFI-Model Model MFIs accounting over 80% of the Microfinance Loan portfolio Scaling up MFIs to HMFIs Funding and long term liquidity of HMFIs Linkage with formal financial system 38

39 HMF Experience MFIs generally accept market based (non subsidized) approach. Availability of long term funds for housing is critical Viewed as commercially viable, with positive externalities, if appropriately designed. Membership based approach Group Bonding Appraising capabilities to manage long term funds, long term risk 39

40 HMF Experience (contd./-) NHB s national coverage through multiple productsand d multiple l programmes Assistance through MFI/NGO s and SHGs Issues: Upscaling the activities of MFIs Improving self-governance Rating Equity support Credit Guarantee Risk Participation Regulation, etc. Training and capacity building NHB will take lead role in providing this architecture 40

41 Summing Up 41

42 Summing Up No Broad-brush Approach Special Intervention for Low Income Housing Need for Segmented Intervention Role of State Governments & Public Agencies Supportive Fiscal & Credit Policy Market/Subsidy based Approach Developing innovative products and institutional mechanism Sustainable partnership : public agencies and private builders, financingi agencies & informal sector, local bodies 42

43 Summing Up Identify land for construction Regulatory relaxation for excess construction Project approach and economies of scale Price determination a critical consideration Liberalize construction finance for low income housing Develop mechanism for Demand Registration Tap Savings potential building borrowers equity 43

44 Way Forward and Conclusion 44

45 Going Forward Widening stakeholders base Broadening Institutional infrastructure t Securitisation through Government support Risk Mitigation Vehicle Funding and Investment Vehicle Tapping Resources and Delivery Channels Construction ti and Finance Dli Delivery Supportive Policy Environment - Fiscal and Regulatory 45

46 Affordable House Price Affordable Credit Conclusion State Govt./Municipal Bodies to provide land and infrastructure Public/Private builders to construct Pricing & Credit critical Credit Risk Mitigation Credit Guarantee Fund Tripartite- Buyers/Builders/Lenders Facilitated by NGOs and Government Overarching Objective INCLUSIVE GROWH WITH STABILITY 46

47 Thank You