VOLUME NINE AUGUST 2010
SPECIAL FEATURE
Building Houses, Financing Homes
India’s Rapidly Growing Housing and Housing
Finance Markets for the Low Income Customers
Monitor Inclusive Markets released its landmark study on
the state of the low income housing market in India —
Building Houses, Financing Homes: India’s Rapidly
Growing Housing and Housing Finance Markets for the Low Income
Customer. The study, which commenced in early 2010, was commissioned
by the National Housing Bank, funded by FIRST Initiative and actively
supported by the World Bank.
Read More
O
OUR PARTNERS
Monitor Partners with Aptus and Grameen Koota in their
micromortgages business
Aptus Value Housing Finance India Ltd. seeks to address the housing finance
needs of low income and middle income customers, especially in the
informal sector, from semi urban and rural markets.
Grameen Koota was founded with a mission to empower the poorest
families. It is present in Karnataka, Tamil Nadu and Maharashtra with
146 branches and nearly 4.5 lakh active customers.
Monitor Inclusive Markets is collaborating with both organisations for
sharing of knowledge and nonproprietary information on the
micromortgages business.
Read More
SECTOR NEWS
Monitor Inclusive Markets hosts a Roundtable Discussion on
Sustainable Technologies in LIH
As part of its market building efforts, Monitor Inclusive Markets convened a
th
session on “Sustainable Technologies in LIH” on July 29 , 2010 in Mumbai.
The objective of the session was to provide an interactive forum for low-
income housing developers to share their experiences, challenges and best
practices in implementing sustainable technologies. The session resulted in
information sharing, cross-learning, and relationship building amongst
participants, which included developers, housing finance companies, and
allied industry representatives.
Read More
@ MONITOR
Four new members join the MIM team
Given MIM’s commitment to making the market in
low-income housing and its overall goal of
developing market based solutions in the social
space, we have expanded the team to include four
new members.
Vivek Hurry heads operations, processes and
finance at MIM while also working to build the
market in low-income housing finance.
Sandeep Nair is our new Chief of Staff and works
with the CEO of the group, serving as his
representative to social entrepreneurs,
corporations, donors, and community and
government partners.
Sangeetha Ramachander is working to catalyze
interest and investment in micromortgages in
India. She will be actively involved in MIM’s efforts
to increase the affordability and accessibility of
home finance to low income households in India.
Sanjay Sharma will be working on MIM’s new
initiative to develop a strategy for the supply of
clean drinking water to urban communities in
India. He will also be actively involved in existing
affordable housing projects.
Read More
MONITOR IN THE NEWS
th
Home Truths, Business Today’s July 25 issue. The
Eleventh Five-Year Plan estimated India's housing
shortage at about 25 million units. Nearly all of this
is among economically weaker and low income
groups. As Ashish Karamchandani of MIM, which
worked closely with Business Today on this study,
writes in a perceptive column, “India Inc. woke up
only recently to the huge profits in this area”.
Read More
FEATURE
Building Houses, Financing Homes
India’s Rapidly Growing Housing and Housing Finance Markets for the Low Income Customers
In 2006, after identifying low-income urban housing as an area of great unmet need in India (~21 million urban households without
proper housing), Monitor Inclusive Markets decided to catalyze the market through the development of a set of innovative solutions
(including a new business model) to address market and customer needs, as well as key stakeholder concerns. Monitor Inclusive
Markets saw this as a space where a market-based solution was not only viable, but could drive significant social impact at scale.
Since then, Monitor Inclusive Markets has been working to “make the market” in urban housing. The
first key step was to get supply of low-income urban housing started. To do this, we focused on raising
awareness about the opportunity and the new model, we engaged with developers to attract them to
the market, provided a range of “hand-holding” services to those interested in the space (which even
went as far as hiring direct sales agents to sell housing in Ahmedabad!), and helped build out the local
ecosystem (e.g., arranged customer financing, provided architectural designs for the housing units). We
also worked on key areas in the larger ecosystem — including the support, incubation and development
of housing finance companies targeting the low income and informal sector customer.
In the last four years, the low-income housing market has seen a series of encouraging developments.
Driven partly by the macro-economic recession (which has led to some traditionally up-market
developers down-switching their target customer segments, and starting to seriously consider the
provision of low-income housing), and partly by the efforts of dedicated “market-makers” and
“field-builders”, (including NHB, World Bank, IFC, Michael and Susan Dell Foundation and Monitor
Inclusive Markets) who are committed to market-based, alternative models of building commercially
viable housing for the lower-income segments, and have demonstrated the value of and the
opportunity in the urban low income housing market, there is now the beginnings of a robust supply
curve in low-income urban housing.
We are happy to report that our efforts in making the market have been successful. Today the urban
housing and housing finance markets for the low income customer are seeing unprecedented levels of
activity across numerous states in India.

Accelerated Impact: The Low Income Housing Market in Urban India

The “state of the market” study shows that the market for good quality, affordable urban housing is growing exponentially, with over
25 developers across 7 states in India building houses that can be bought by households earning as little as Rs. 7,500/month. This by
itself is encouraging, but our belief that this represents a shift toward a more sustainable supply equation is informed by a number of
additional factors that have become apparent in the last year.
The first factor is the growth of the number of new cities that are starting to see supply of low income housing. As Figure 1 shows,
Ahmedabad and Mumbai, which were the initial centers for low income housing projects, continue to build on the success of the early
projects, and today boast numerous developers providing housing to low income customers. We expect that other cities across India,
which currently have one or two pioneering developers bringing houses to market, will similarly prove to be fertile grounds for the
proliferation of low income housing projects.
Second, the new mix of developers contains not only small developers but also larger, more established developers as well as some
corporate players. The latter two are entering the space with a view to significant numbers. They are set apart from the smaller
developer in that they see the low income housing market as a scale “manufacturing” opportunity, and are in the process of doing
sizable initial projects to confirm feasibility, as a key step to building successful businesses at high volumes.
 Third, these developers emphasize the importance
of new ideas, whether it be the testing of
innovative, scale-enhancing construction
technologies that reduce construction timelines
and increase profitability; whether it be
participating in the development of new
architectural unit layout designs that amplify
comfort and livability in small spaces; or,
incorporating sustainability elements that save on
cost and reduce environmental impact. The
innovation imperative is critical to successfully
serving a customer for whom both low price and
high quality are non-negotiable. It also indicates
that these players are targeting better quality,
better use of space and better customer
experiences while holding or lowering prices over
time.
Our study highlights the commercial viability and
marketability of the space, based on in-depth
studies of developers in Mumbai and Ahmedabad.
Developer project IRRs can be as high as 40%–50%
in these locations, with gross margins in the region
of 20%–30%. And the demand for such low income
urban housing far outstrips supply, as seen from
the pace of sale of units in various project sites (be
in Mumbai, Ahmedabad or Chennai).

Increasing Access: The Housing Finance Market

for Low Income Customers
The study also shows that there are some encouraging
developments in the availability of housing finance
for low-income and informal sector urban customers.
However, in the next 12–24 months, as the number of
housing units coming into the market increases
considerably, the supply of housing finance for low-
income and informal sector urban customers may not
be able to keep pace.
Today the market has a number of players which, in
addition to existing players, include dedicated start-ups
and established companies with excellent track records
in allied businesses. These HFCs are also aware of the
innovation imperative of serving the low income
customer, and even more so, the informal sector low
income customer. It is a fundamentally different
business from traditional housing finance, as this
income group (notably the informal sector workers
within it) rarely has the proof of income and
expenditure documentation that large mortgage
lenders rely upon to conduct their credit assessments
— it therefore requires a fundamentally different business model. The innovations of the HFCs who are currently testing and refining
their model for assessing these customers in urban settings, are demonstrating some of the different elements of the model:
field-based approaches for cash-flow verification, combined with building up databases about customer sub-segments to increase
assessment reliability, and investing in training loan officers who are the front-end of the origination and assessment process. To serve
a segment which comes with challenges, each of these companies are constantly innovating, e.g. , with regard to customer risk
assessment mechanisms, distribution models, collection, mechanisms, and back-office procedures.
The study provides ample proof that the housing
finance market for low income customers is feasible
and profitable. Based on an illustrative model
Monitor Inclusive Markets constructed of a
pure-play HFC targeting the low-income, informal
sector customer, the HFC can turn profitable within
3 years, with a RoA of 2.5% to 2.9% in year 5 and a
RoE around 17% in year 7. Such returns, and the
sheer size of the opportunity, should continue to
attract more players into this still largely
underserved market segment.

Partners: The ‘Market-Makers’

The findings of the report are a tribute to the efforts
of a vast range of people, including Monitor
Inclusive Markets’ partners, who have been
supporting our efforts in making the market. Over
the last 4 years the National Housing Bank, FIRST
Initiative, World Bank, International Finance
Corporation, Michael and Susan Dell Foundation, FEM Italia Onlus and the Rockefeller Foundation have supported our market-making
efforts by contributing financially and by giving excellent advice and guidance. We would also like to extend our gratitude to our well-
wishers, our developer and housing finance partners and our supporters, without whom this work would have been much more difficult.
The report contains much more details and in keeping with our commitment to disseminate our work in the public domain, the
summary of the report is available for download (along with the full report) on the Monitor and Monitor Inclusive Markets website
(http://www.mim.monitor.com).
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OUR PARTNERS

Monitor partners with Aptus and Grameen Koota in their micromortgages business
Monitor Inclusive Markets is collaborating with Aptus for sharing of knowledge and nonproprietary information on the micromortgages
business. Under the collaboration, both Monitor and Aptus will share the learnings in the area of micromortgages with each other.
Aptus Value Housing Finance India Ltd. seeks to address the housing finance needs of low income and middle income customers,
especially in the informal sector, from semi urban and rural markets. It is promoted by Mr. Anandan, who was the Managing Director of
Cholamandalam DBS till 2006 and Cholamandalam MS from 2006-08. Aptus’ initial area of operation would be in Southern India with a
focus on Tamil Nadu. Aptus formally commenced operations on 19 August 2010 and has sanctioned loans worth Rs 100 lacs and
disbursed loans worth Rs 50 lacs. The Company aims to disburse loans worth Rs 125 crores in its first year of operations. More
information can be found at http://www.aptusindia.com/
In the case of Grameen Koota as well, MIM will share knowledge and nonproprietary information on the micromortgages business.
Grameen Koota was founded in Bangalore in 1999 with a mission to empower the poorest families. It started out as an NGO and has
since converted to an NBFC-MFI. It is now present in Karnataka, Tamil Nadu and Maharashtra with 146 branches and nearly 4.5 lakh
active customers. It has so far focused on lending short-tenure loans primarily to women through self-help groups. However, in May
2008, it initiated the individual lending program – MAARG – focused on lending to individual male members of households in urban
areas. As the next stage in its evolution from being a pure microfinance player, Grameen Koota is considering expanding its portfolio of
financial services — borne out of a strong desire to effect a stronger and more holistic change amongst its customers but in a
commercially viable manner. The Company is looking to launch a housing finance company targeted at low income customers and is in
the process of submitting the necessary details to the regulator National Housing Bank. More information can be found at
http://www.gfspl.in/
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SECTOR NEWS
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Monitor Inclusive Markets hosts a roundtable discussion on sustainable technologies in low income housing
th
As part of its market building efforts, Monitor Inclusive Markets convened a session on “Sustainable Technologies in LIH” on July 29 ,
2010 in Mumbai. The objective of the session was to provide an interactive forum for low-income housing developers to share their
experiences, challenges and best practices in implementing sustainable technologies. The session resulted in information sharing, cross-
learning, and relationship building amongst participants, which included developers, housing finance companies, and allied industry
representatives.
MIM started the session by providing a brief overview of 10 sustainable technologies found to be most feasible from a developer and
consumer perspective, based on a IFC sponsored study in 2008. The group then discussed on-the-ground experiences in implementing
these technologies, and provided insights into the feasibility of incorporating these technologies in LIH.
A key takeaway from the session was that there is substantial activity and interest in the area of sustainability. Many of the developers
present had already incorporated sustainable features in their projects, and shared the implementation challenges and cost economics
with the group. Many in the room were also considering new technologies and benefitted from the recounting of these experiences.
The opportunities for cross learnings will continue post this session through site visits and information sharing.
Given the growing interest in sustainability, Monitor plans to hold another session in six to twelve months.
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MONITOR IN THE NEWS

India's next mega market, Business Today Jul 22, 2010
(Column by Ashish Karamchandani, Monitor Inclusive Markets)
http://businesstoday.intoday.in/index.php?option=com_content&Itemid=1&task=view&id=15597&sectionid=27&issueid=87&page=arc
hieve

Lending to people not paper, Business Today, July 22, 2010

(Column on affordable housing finance by Nishant Lalwani, Monitor Inclusive Markets)
http://businesstoday.intoday.in/index.php?option=com_content&Itemid=1&task=view&id=15598&sectionid=27&issueid=87&page=arc
hieve
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@ MONITOR
Four new members Join the Monitor Inclusive Markets India Team
Vivek Hurry
Vivek heads operations, processes and finance at Monitor Inclusive Markets and is also working to build the market in low-income
housing finance.
With over 28 years of experience across the service sector and as an entrepreneur, he has always had a keen focus on enhancing
systems and processes and harnessing technology to improve efficiency and productivity.
Vivek has worked in shipping, banking and consumer finance before founding a software development company. In 1999 he co-founded
and launched India's first online resource for Indian law: lexsite.com, a pioneering library of legal material together with research
services. LexSite is subscribed to by a wide spectrum of companies, law firms and consultants.
His third entrepreneurial venture was as a co-founder of one of India's earliest legal process outsourcing companies. From an initial
4-member team, he grew it to a 200-person company, with a clientele spread across US, UK, the EU and China, including the 3 largest
legal publishers in the world.
Vivek is a Chartered Accountant and a graduate of the Chartered Institute of Management Accountants, UK. He also holds a Bachelor of
Commerce degree from Bombay University.
Sandeep Nair
Sandeep is the Chief of Staff for the CEO at Monitor Inclusive Markets. He works with Ashish Karamchandani and serves as his
representative to social entrepreneurs, corporations, donors, and community and government partners. Sandeep is also currently
working on increasing the supply of housing finance as well as coordinating MIM's fund raising efforts.
Prior to joining Monitor, Sandeep worked with an equity and debt fund focusing on microfinance in India, a mobile technology startup,
and as an analyst at Capgemini working primarily with clients in the Financial Services industry.
Sandeep has an undergraduate degree in Computer Engineering from Virginia Tech and a Masters in Corporate Finance from
SDA Bocconi, Milan.

Sangeetha Ramachander
Sangeetha is involved in catalyzing interest and investment in micromortgages in India and an integral part of MIM’s efforts to increase
the affordability and accessibility of home finance to low income households in India.
Prior to Monitor, Sangeetha worked with Ernst & Young for six years in Bangalore and Chennai, where she was part of the Lead
Advisory team that provides advisory services on a wide range of transactions including mergers and acquisitions, private equity
syndications and strategic reviews. Sangeetha also worked with HSBC in their Personal Financial Services division in Kolkata for two
years before moving to Ernst & Young.
Sangeetha is a graduate of the Indian School of Business and also holds a Masters in Economics from the Gokhale Institute of Politics
and Economics.

Sanjay Sharma
Sanjay will be working on MIM’s new initiative to develop a strategy for the supply of clean drinking water to urban communities in
India. He will also be actively involved in existing affordable housing projects.
Prior to joining Monitor, Sanjay was an American India Foundation William J. Clinton Fellow placed at Roshan Vikas, an urban
microfinance NGO in Hyderabad. There, he worked on an organizational restructuring to strengthen Roshan Vikas’s capabilities and
plan for future expansion. Prior to this role, Sanjay spent three years at JPMorgan in New York. At JPMorgan, he spent two years as an
investment banking analyst in the firm’s Public Finance group, advising state and local governments on infrastructure finance. Sanjay
spent his third year at JPMorgan as an acquisitions analyst focused on identifying and executing investments in transportation and
energy infrastructure, including renewable energy projects in the U.S. and Europe.
Sanjay has a B.S. in Business Administration from Boston University’s School of Management.

We are still recruiting for a few key positions in Monitor Inclusive Markets, if you are interested please get in touch with Naina Batra
(naina_batra@monitor.com)
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