NHB
Housing Microfinance:
NHB’s Initiatives
P.R.Jaishankar
Assistant General Manager
National Housing Bank
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PRESENTATION STRUCTURE
NHB
◊ Housing: An Agent for Financial Inclusion
◊ Housing and Housing Finance
◊ Housing Micro Finance: Role of NHB
◊ Housing Micro Finance: NHB’s Experience
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HOUSING: AN AGENT FOR FINANCIAL INCLUSION
NHB
◊ Housing has direct impact on employment and
income generation - An engine for Equitable and
Balanced Economic Growth.
◊ Impact
in terms of Improved habitat, Living,
Educational, Social and Cultural standards leading to
Human Capital Formation and thereby the future
Income capabilities
◊ Improved productivity leads to enhanced Income,
Savings and Repayment potential on sustainable lines
◊ Sustainable Human Settlement: An Effective tool
towards “Financial Inclusion”
Stability and Social Inclusion
with
Financial
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HOUSING DEMOGRAPHICS
NHB
HOUSING SHORTAGE
NHB
• Housing Shortage estimate at the end of the 10th
Plan:
– 24.7 million for 67.4 million households
– Expected to increase to 26.53 million units for 75.01
million households by end of 11th Plan period
– 99% of the shortage exists in EWS / LIG segments
• Pressure on Urban Services due to Migrating populace.
• Still vast non-formal segments remain un-served.
5
HOUSING & FUND REQUIREMENT 2007-12
Particulars
Housing Requirements (2007-12)
(in million units)
NHB
Funds Requirements (2007-12)
(in ‘000 crores)
R
U
T
32
16
48
344
645
989
EWS including BPL, MAPL
14
7
22
36
74
110
Upgradation of Existing Pucca/
Semi Pucca/ Katcha Houses
23
9
32
35
24
59
Total (Additional Houses +
Upgradation / Repairs etc.)
55
25
80
379
669
1048
Additional Houses
R
U
T
Of which
• 48 million additional houses are required during Eleventh Plan Period
2007-12;
• There is need for diverse sources of finance and diverse financial
instruments
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Institutional Finance –
Emphasis on loans above Rs.5 lakhs
0
upto 0.25 L
-20
42.38
40.74
13.72
2.49
-6.15
20
-6.19
40
14.33
60
>0.25 L to 2 L
> 2 L to 5 L
Credit Limit
> 5 L to 10 L
> 10 L to 25 L
Outstanding Loan
CAGR on Housing Loans of HFCs (2002-06)
60
52
50
CAGR (%)
CAGR No. of Accounts
CAGR O/s Housing Loan
- 12.3%
- 28%
 Housing Finance Market is
“Value Driven rather then Volume Driven”
Loan slabs (Rs. in Lakhs)
Accounts
105.33
103.76
81.93
41.44
80
-10.09
CAGR (%)
100
81.76
81.56
120
102.96
CAGR on Housing Loans of SCBs for 2000-06
140
NHB
 Increased emphasis on loan categories
above Rs. 5 Lakhs – Trend Continuing
 Increased emphasis in lending
in Metropolitan areas
40
30
 Rural Housing Finance stagnant at 10%
(Source: BSR Reports, RBI)
22
20
7
10
6
0
-10
upto
-1.71 L
>1 L to 3 L
> 3 L to 5 L
> 5 L to 10 L
Loan Slabs (Rs. in Lakhs)
> 10 L
 Need to develop New Financial Architecture
for Affordable Housing
Source: BSR, RBI & T&P, NHB Reports
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AFFORDABLE HOUSING
NHB
• Housing is the combined matrix of following elements:
–
–
–
–
Land Supply and Management; Land Use Optimization;
Infrastructure – On-site and Off-site;
Building Technology, Materials and Labour;
Finance;
• Equity/Capital and Borrowing
• Liquidity
– Profit Component;
• Affordability:
– A Relative Term
– Depends on Income/Capacity to ‘afford’ the above elements.
• Target Segment Affordability (Deepak Parekh Report):
– Price: 4 times Gross Annual Household Income, AND
– Carpet Area: upto 600 sft, AND
– Rent: Upto 30% of Monthly Household Income
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MICROFINANCE: TOOL FOR POVERTY ALLEVIATION
NHB
• Emergence of Microfinance to enable institutional credit
flow to the poor and replace informal credit sources
• Microfinance: "The provision of thrift, credit and other
financial services and products of very small amounts to the
poor in rural, semi-urban and urban areas for enabling them
to raise their income levels and improve their living
standards”
• Enhance the poor households to
–
–
–
–
Increase income
Building assets
Empowerment
Active partners in development process
• Reduce their vulnerability in times of economic stress
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Microfinance Sector
NHB
• Client Base: 22.6 million (2009)
• 13.2 million Rural; 9.4 million Urban
• YoY Growth 60%
• Total Outstanding Microfinance Loans: Rs.35,939 crore (09)
• Loan Portfolio of MFIs: Rs.11,730 crore (09)
• At current levels Microfinance constitutes 1.29% of Gross Bank
Credit of Scheduled Commercial Banks
• Average Loan Size: Rs.5400/- (4200/- in 2008)
• 38% of clients with average loan size over Rs.10,000/• Constitution:
• Non Banking Finance Companies
• Not for Profit MFIs (Sec 25 Co.s, Public Trusts, Societies)
• Mutually Aided Cooperative Societies
• Market Shares: 34 NBFCs – 76% of overall MF Portfolio; 133
Societies -10%
• Penetration: Greater in Southern Region
• 54% of Clients ; 58% of loans
Source: Micorofinance India: State of Sector Report 2009
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MICRO FINANCE INSTITUTIONS:
EFFECTIVE DELIVERY CHANNELS
NHB
• Timely and adequate credit and other financial
services to the poor at their doorstep - an edge
• Credit histories of the poor borrowers
• Good systems and procedures for giving and
collecting loans.
• Most of the MFIs have maintained recovery rates
in excess of 95%.
• Very few MFIs have ventured into providing
housing loans to the poor.
• Need to tap the potential of MFIs which can
provide housing loans to the poor.
NHB’s STRATEGY FOR FINANCIAL INCLUSION
NHB
•
◊
◊
◊
◊
CUSTOMIZED FINANCIAL PRODUCT INTERVENTION:
RURAL HOUSING:
Supplementing Government Schemes
Productive Housing in Rural Areas
Financing SHGs - Partnership Approach - NGOs/MFIs/Sec.25
Rural Housing Development Fund
• URBAN HOUSING:
◊ Supplementing Govt. Schemes e.g. JNNURM
◊ Financing SHGs – Partnership Approach - NGOs/MFIs/Sec.25
◊ Slum Redevelopment and Up-gradation
◊ Integrated Township Development Projects (PPP projects)
HOUSING MICROFINANCE: NHB’s ROLE
NHB
• Focus – Un-served and Under-served
• Housing Micro Finance (HMF)
• Integrated Habitat Approach
• Productive, Income Generating Housing
• Savings-induced Housing
• Incremental Housing
• Water and Sanitation,
• Women oriented
• Partnership approach –
–MFIs, Community Based Institutions
–Finance, Co-finance,
–Capacity building,
–Portfolio Securitization,
–Equity support to Rural HFCs
13
NHB’s HMF – KEY FEATURES
NHB
Amount of
Loan
Generally 2 to 7 times larger than average micro-credit loans
Loan Term
2 - 5 years for improvement and up to 10 years for fresh
construction
Delivery
Channel
Framework
•
•
•
•
•
Housing Micro Finance Institutions
Non Government Organizations
Societies registered under Societies Registration Act, 1860
Section 25 Companies
Any other institution approved by Govt. / RBI for purposes
of undertaking microfinance
Security /
Collateral
•
•
•
•
Hypothecation of Book debts
Agreement to mortgage
Group guarantee of SHGs
Other forms of security like FDRs, etc.
Wherever title deeds are available, they are mortgaged.
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HMF – KEY FEATURES
NHB
Selection of
borrowers
Poor people (in Urban and Rural areas) with means of
repayment like artisans, craftsmen and people in the
informal sector. Should have completed atleast 3 loan
cycles successfully with MFI.
Co-Financing
MFIs
A productive loan may also be extended by MFIs (as cofinance) to enhance repayment capacity.
Other Salient
Terms
• MFI Borrowers to on-lend to SHGs.
• Track record for with MFI borrower.
• Members of SHGs to have successfully completed atleast
three loan cycles.
15
HMF: RISKS AND MITIGANTS
NHB
Risks:
• Affordability of Borrowers
• Viability of MFIs
• Limited access to medium and long term funds
• Insecure land tenure
• Requirement of high element of savings
• Difficulty in obtaining Group Guarantee
Mitigants:
• Proper selection of clients – Seasoned clients
• Flexible funding mechanisms
• Insistence on Standard Corporate Governance of MFIs
• Need for co-ordination between formal credit institutions to
mitigate geographical concentration risks
• Capacity building – Training, Research and Development
• Use of information technology & Micro insurance
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SIGNIFICANCE OF HMF
• Creation of Assets
• Enhanced Social Security
• Increased Productivity
• Increased Bargaining Capacity
• Increased Volume of Business
• Saving in Recurring Expenses
• Providing Sustainable Employment
• Women Empowerment
NHB
NHB’s INITIATIVE
NHB
• NHB has experience in HMF on pan India basis.
• Leading Micro Finance institutions across the country
are partnering with NHB for rolling out HMF
programmes for their members.
• Financial support is provided on self sustainable lines.
• Composite loan products are being promoted to
improve the viability of the programme by helping in
increasing income of beneficiary.
• Separate Water and Sanitation component in the
housing has been included to improve penetration of
sanitation facilities.
18
NHB’s Partnership with UN Habitat
NHB
• NHB and UN Habitat have signed Agreement of
Cooperation for collaborating in the field of water
and sanitation in India.
• Delivery of credit to targeted segments at relatively
low interest rates for water and sanitation facilities is
envisaged through the Micro Finance Institutions and
Urban local Bodies.
• Typical HMF loan under this programme to have two
parts
 Housing loan for construction / repairs /
upgradation / incremental housing (at competitive
rates) - with NHB funds
 Loan for water and sanitation facilities (at
subsidized rates) - with UN Habitat support
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NHB’s FINANCIAL ASSISTANCE TO HMF
(Rs. in Crore)
Sanctions
Disbursements
NHB
Houses
Rural
33.55
17.80
6289
Urban
48.12
11.88
9318
Total
81.67
29.68
15607
Madurai, TN
40
30
30
28.3
20.41
20
Mumbai, Maha
10
0
5.25
2.6
2006-07
2.49
2007-08
2008-09
Warangal, AP
20
NHB’s HMF – STATE-WISE
NHB
S.No
State
Sanction
24.55
Disbursements
8.07
Houses
1
Andhra Pradesh
2801
2
Assam
0.30
3
Gujarat
10.00
0.30
1300
4
Karnataka
14.00
10.89
2475
5
Maharashtra
5.82
3.16
147
6
Orissa
7.00
4.50
1085
7
Tamil Nadu
19.00
2.26
7576
8
Kerala
1.00
Total
81.67
100
223
29.68
15607
(Rs. in Crore)
21
SHG housing at Tirupati, Andhra Pradesh
NHB
A house before sanction of NHB loan
A house after construction aided by
NHB loan
22
Slum Rehabilitation Project, Mumbai
NHB
23
Tamil Nadu
A house constructed in Madurai
NHB
A house constructed in Sivaganga
24
Tamil Nadu
House in Pudukottai
NHB
House in Sivaganga
25
Andhra Pradesh
House constructed in Warangal (AP)
NHB
House Constructed in Hanamkonda (AP)
26
A Few Toilet Designs
NHB
Toilet designs under implementation by one of the
MFI partners of NHB
27
HOUSING (MICRO)FINANCE: IN SUM
NHB
• Vast untapped market – Urban and Rural
• Market based inclusive finance feasible, and
• Requires range of:
–
–
–
–
–
–
–
Customized financing products,
Risk mitigants,
Securitization
Viability gap funding (in certain segments),
Specialized Delivery systems,
Dedicated Financial intermediaries,
Capacity building
• An entirely Specialized financial architecture for
Housing Microfinance
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THE WAY FORWARD
NHB
NHB’s MARKET DEVELOPMENT ENDEAVOURS TOWARDS
CREATION OF APPROPRIATE FINANCIAL ARCHITECTURE
•Risk Mitigation
◊Mortgage Credit Guarantee
◊Title Indemnity
◊Credit Guarantee Fund
•Securitization: Creation of Secondary Mortgage Market
◊Liquidity and Credit Enhancement
•Other Measures
◊Capacity building – Training, Research and Development
◊A Specialized HMF Corporation
◊Equity Support
◊Facilitating Regulations
NHB
Thank You
Visit us at : www.nhb.org.in
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