Trends in Retail Housing Loans
- HFC’s Perspective
Presented by:
Anil Sachidanand (CEO - DHFL)
4/13/2015
NHB – CEO’s Meet 17th March’10
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AS per vision 2020 “housing for All” 100 million housing units would be
required - Demand outcasts Supply
High Demand growth driven by:
 Improved affordability
 Increasing urbanization
 Favorable demographics
 Increasing economic activity
 Increase in supply of affordable homes
 Price correction in residential real estate market
Housing Finance penetration is still low in Tier-2, Tier -3 cities. Need more HFC’s, RRB’s,
Banks with focus on housing finance.
4/13/2015
NHB – CEO’s Meet 17th March’10
2
Level Playing Field for HFC’s
 Two fold regulatory structure – On occasions results in duality
of rules
 Convergence on differences with aspect to :
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4/13/2015
Taxation treatment
Capital adequacy
Liquidity requirements
Deposit insurance
Disclosure requirements
NHB – CEO’s Meet 17th March’10
3
Lending Practices
 Lower Income segment is still “untouchable” by many of the
players – Need for bringing in Financial Inclusion
 More support required for developer financing in affordable
housing segment.
 Lack of standardization in the lending process by various banks
& HFC’s
 Increasing proportion of other loans in HFC’s credit portfolio due
to intense competition on yields from banks
4/13/2015
NHB – CEO’s Meet 17th March’10
4
Other Parameters
Rate of Interest
 Introduction of 8% Home loans bought in interesting dimensions into
the Indian Mortgage Finance Market in the recent past
 Broadening the market base – need for an independent floating rate
benchmark
Prepayment Charges
 Prepayments to be correlated with interest rates
 We still lack a well developed model to accurately forecast mortgage
prepayments
 Customer’s lingering debt averse attitude play a more crucial role in
prepayment patterns
4/13/2015
NHB – CEO’s Meet 17th March’10
5
Customer Service
 Emerging as one of the key areas in competition to win over
customers
 HFC’s have been upgrading their technology and investing in
sophisticated systems for sourcing and processing and managing
information pertaining to home loan customers
 On the service front the housing finance Company’s have begun
addressing concerns of borrowings through counseling and legal
advisory services on matters pertaining to property’s title, technical
evaluation, pricing etc.
 As the scope for product differentiation is increasingly getting limited,
HFC’s will increasingly compete on the strength of their service
quality
4/13/2015
NHB – CEO’s Meet 17th March’10
6
Together GOI- RBI-NHB-HFC’s need to work towards overcoming the
challenges and constraints
 Lack of Uniformity of norms and variation in standards amongst industry
players : Imposes systematic risks, which can be a potential threat
 Aggressive approach may lead to defaults and downward revision of interest
rates - may lead to erosion of profitability in the long run
 Industry Fragmentation: Major impediment for its growth
 Conflicting Interests: Both banks & HFC’s competing with each other for the
same housing pie but functioning and lending practices seem to bear no
similarity
 ALM: Asset liability mismatch one of the biggest risks confronted by HFC’s
 Non availability of central registry for housing mortgages
4/13/2015
NHB – CEO’s Meet 17th March’10
7
What needs to be done?
 Encourage / initiate small savings which can serve future housing needs thru Banks
or HFC’s?
 Incentivize developers and HFC’s supporting affordable housing
 Standardize origination intermediaries through licensing etc and strong punitive
measures for fraudulent intermediaries
 Start to implement Electronic format for property registrations across the country
 Develop products for seasonal income earners and aligning them with standard
NPA norms
 Need for a mortgage guarantee company
 FDI Constraints: ECB / FDI Route to be opened for HFC’s
 Development of capital market by promoting securitization in India
4/13/2015
NHB – CEO’s Meet 17th March’10
8
DHFL: Way forward
 A leading player with over 25 years of expertise in the LMI segment of the
Housing Finance Industry
 Consolidated loan book stands at Rs.83.30 billion (Dec’09) with an average
ticket size of apprx. Rs.5 lac
 Pan – India captive distribution network covering 194 locations
Way ahead:
 Continued focus on LMI segment
 Increase penetration in tier-2 and tier-3 locations through Public Private
Partnerships
 Supporting affordable housing initiatives. Providing technical and marketing
advisory solutions to small size developers
4/13/2015
NHB – CEO’s Meet 17th March’10
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