CHAPTER II

GROWTH, STRUCTURE AND DEVELOPMENT OF HOUSING FINANCE

IN INDIA

2.1 Introduction

Housing Finance is an important element of the housing policies adopted by

the government. Shelter is one of the basic needs with finance as a major component.
Human beings have a basic need of shelter, but very few people are able to construct a
building with their savings because it requires a lot of money. As a result, there is a
tremendous demand and opportunity for building plans to finance the constructions or
acquisition of a home. Housing investment is an important component of promoting
the socio-economic development of modern societies. Therefore, the increase in
housing investment is a natural consequence of the welfare state objectives of the
contemporary government. One of the unique sectors of the housing industry is that
does not fall under the manufacturing and services sectors.

Since its inception, the home financing industry in India has gone through, the
home financing industry in India has gone through a fundamental transformation. In
India, the housing finance industry has gone through a structural upheaval that is
unprecedented since the beginning of its development. Until the mid 1980s, no
reliable financial system existed. By setting up of National Housing Bank, a wholly
owned subsidiary of RBI, the housing finance system has been institutionalized.
Banks, cooperatives and specialist housing finance organizations made up most of the
top institutions of the housing finance system in 1988. As banks and HFIs enter the
housing finance sector, it becomes a more competitive market. During this time, the
distribution of housing finance has grown rapidly and advanced in many ways.

There are five distinct phases of the Indian Housing Financing revolution:
They are as follows:

43
2.2 Phases of Housing Finance in India

Chart 2.1

Phases of Indian Housing Finance

• BEFORE 1970
PHASE 1 • GOVERNMENT DOMINATION

• 1970-1980
PHASE 2 • HUDCO AND HDFC ESTABLISHMENT

• 1980-1990
PHASE 3 • ESTABILSHMENT OF NHB

• 1990-2000
PHASE 4 • LIBERLIZATION OF INTEREST RATES

• 2000 TO PRESENT
PHASE 5 • HIGH GROWTH

Phase I (Before 1970) Government Domination

During the 1950s and 1960s, housing provision for the lower income group
was dominated by the state. For industrial workers, members of the economically
disadvantaged sections of society and slum dwellers, the Indian government operated
several subsidized housing and loan programs. Rental housing programs were also
available for state government employees. Although they contributed to the MIG and
HIG, the private sector played a relatively minor role in the provision of home loans.
Government intervention focused on providing readymade housing units at very low
prices o without charges. As housing initiatives received a very small portion of the
country’s overall budget and were therefore costly and had little to provide.

44
Phase 2 (1970-80) HUCDO and HDFC Establishment

The second phase began in the mid-1970s, with the establishment of HUDCO.
It was created to encourage and advance housing and urban development initiatives of
government agencies. HUDCO is important for the implementations of government
programmes aimed at providing housing to those living below the poverty level.
HDFC, a renowned private player, was established in 1977. Its success shows that
house finance is a successful industry. It is one of the top provides of home loans in
India.

Phase 3 (1980-1990) Establishment of NHB

The third phase covers the 1980 to 1990s, which was distinguished by the
establishment of the NHB in 1987. It served as the country’s regulator of housing
financing. During this, the government sent instructions to several organizations
including LIC and Commercial Banks, which were responsible for disbursing funds as
per priority sector requirements. Similarity, mutual funds and provident funds were
allowed to allocate a part of their funding to real estate. Two insurance companies,
LIC and GIC, started helping the sector through recently established housing finance
companies and indirectly by allocating a part of their net growth to socially conscious
projects.

Phase 4 (1990-2000) Liberalization of Interest Rates

Urban local bodies (ULBs) participated heavily in the fourth phase throughout
the 1990s as a result of the 73rd Constitutional Amendment. However, there has not
been much housing development by ULBs due to limited funding; inadequate bank
credit and capacity issues. The cost of loans made prior to 1994 underwent significant
revisions throughout the era of liberalizations. NHB controls the cost of home loans
by setting different rates depending on the size of the loan. After being updated in
1994, these regulations allowed market rate to be charged for loans in excess of
Rs.25,000. The fourth phase saw the dominance of fixed interest rates. Convertible
offers began to emerge towards the end of the decade.

45
Phase 5 (2000 to Present) High Growth

There was a sharp increase in mortgage loan disbursements in the fifth phase.
Housing finance has become a successful industry due to the low interest rate
environment, rising disposal income, stable property values and financial incentives.
More private investment was encouraged by the government, which also launched
several PPP –based Public Private Partnership based programmes. To get more
private funding, it designated slum reconstructions as a Corporate Social
Responsibility (CSR) activity and allowed 100 percent FDI in the housing sector.

2.3 The Housing Finance Institutions

Housing finance is an important input in Housing. Several Housing Finance

Institutions have come into existence in recent years. They generally meet the
demands of the middle and upper-income groups. There are many Banking companies
and other Financial Institutions that have forayed into the field of housing finance.
Housing Finance Institutions in India are engaged in Housing Finance and the same is
presented in chart 2.2:

46
 Chart 2.2

The Housing Finance Institutions in India

NHB
nt
Development Financial
Institutions
NABARD

Financial Institutions
Housing Finance
Non Banking Finance
Companies
Companies
Other NBFCs
P
U
Private Sector Banks B
Scheduled Commercial
L
Banks
Public Sector Banks I
C
Banks Scheduled Urban Co-
Operative Banks

Co-operative Banks
District Co-Operative
Banks

Scheduled State Co-

operative Banks

Agriculture &Rural Primary Land

Development Development Banks
Other Institutions

Apex Co-Operative Housing Societies

Housing Societies

47
2.4 Housing development under Five Years Plans

The Housing Industry has been placed under Priority Sector Industry by the
Central Government. The Housing Finance Scheme was emphasized in the Five-Year
Plans, especially for the poor and weaker sections of society. In India, almost all the
expenditures are guided through plans and the housing sector is also not an
exemption. The Government of India allocated funds for Housing through various
Five Year Plans.

Housing is one of the basic needs of human beings, keeping this point in view,
the Government of India right from the First Five Year plan allocates funds to the
housing sector. To tackle the Housing problems in the country, the Central
Government has initiated its Housing programmes and policies from time to time over
various plans and the State Government implemented them. Five-year plans have
been formulated by the Government for the development of housing; these
developments undertaken from 1st to 12th Five Year Plans are given below:

First Five Year Plan (1951-1956):

The First Five Year Plan's main objective was to raise the minimum standard
of housing. It suggested reducing the construction cost of houses, especially labour
and material cost, by encouraging economical architectural and structural designs.
Due consideration was given to research in the field of construction materials and
techniques. The main thrust of the research was on optimum utilization of indigenous
inputs for the manufacturing of construction materials. The plan gave due attention to
the role of private participation in solving the problem of the housing shortage.
During this plan period, two social housing schemes, namely the Integrated
Subsidized Industrial Housing Scheme (1952) and the Low Income Group Housing
Scheme (1954) were launched during this plan period.

Second Five Year Plan (1956-1961):

During the Second Five Year Plan, subsidized industrial housing schemes for
the low income group were further strengthened. Apart from the schemes for slum
clearance and slum improvement, new schemes like Plantation Labor Housing
Scheme (1956), Village Housing Scheme,(1956) Land Acquisition and Development
Scheme, and Middle Income Group Housing Scheme(1959) were introduced. Specific

48
housing schemes, handloom weavers and displaced, etc. were introduced in rural
areas for the benefit of Scheduled Castes, Scheduled Tribes, and Backward Classes.
Housing programs for employees and workers of various State Government / Central
Government departments were carried out on a large scale. During the plan period,
the Government revised its policy of giving direct loans to the LIG category for
building houses. It also started assisting state governments and local authorities to
develop sites and plots for sale to beneficiaries belonging to the LIG category. Public
Financial Institutions have been associated with Government housing programs for
the Second Five Year Plan period.

Third Five Year Plan (1961-1966):

The third Five Year Plan (1961-66) specified the need for land acquisition and
the control of the real estate market. The extent of finance provided was usually a
maximum of 80% of the cost of construction and this varied from plan to plan. In the
case of land acquisition and development plans, financial assistance was given to the
local bodies / urban Property Department. Towards the end of this plan, Housing
Boards started programs to eradicate the housing problems of low income groups and
slum categories. To find a solution to the housing shortage in the state, respective
state governments increased the number of State Housing Boards funds. City level
organizations like Development Authorities, Urban Improvement Trusts, and Slum
Clearance Board (SCB) were set up by many states.

Fourth Five Year Plan (1969-1974) :

In the Fourth Five Year Plan period, more emphasis was placed on low cost
housing schemes due to the high cost of construction of houses, inadequate
contribution from private and cooperative sectors to meet the growing needs of the
poorer sections and deteriorating condition of old slums into new slums. A special
public agency called Housing and Urban Development Corporation (HUDCO) was
started during this plan period. Various State Governments had funded Housing
Boards through state budgetary allocations and slum clearance schemes. State
Housing Boards began to issue debentures on State Government guarantees to
institutions such as nationalized banks funding. It provided financial assistance to
various Housing Boards and Cooperative Housing Societies across the country.

49
Fifth Five Year Plan (1974-1978):

Housing Finance Development Corporation (HDFC) was started in the Fifth

Five Year Plan period. It was a significant addition to the Housing sector. A scheme
for improving housing was also started during this planning period. The Minimum
Needs Program (1974) and the Twenty-Point Program (1975) were introduced to
provide housing to the poor and construction of houses through wage employment,
apart from creating minimum health conditions in the slum area. Accordingly, steps
were taken to improve the environmental conditions to provide housing sites for
landless laborers and weaker sections of rural areas as well as urban slums.

Sixth Five Year Plan (1980-1985)

The Sixth Five Year Plan (1980-85) focused on the provision of shelter and
services for the poor. The scheme seeks to utilize the resources of the public sector in
such a manner to achieve maximum results and provide the maximum possible houses
to the entire homeless population.

Seventh Five Year Plan (1985-1990)

The Seventh Five Year Plan identified the problems faced by the urban poor
and introduced the Urban Poverty Alleviation Plan. The National Housing Policy
(NHP) was announced during this plan. The long term goal of the NHP was projected
to eliminate homelessness, improve inadequate housing conditions and provide a
minimum level of basic services and facilities to all. The plan called for the setting up
of fair and diversified institutional credit for housing development. It also stressed the
need for strengthening HUDCO and the creation of new cooperative building
societies.

Eighth Five Year Plan (1992-1997)

During the Eighth Plan period, an enabling strategy was attempted to create an
enabling environment for the housing activities by removing various constraints and
providing direct assistance to the disadvantaged groups of poor, self-employed,
physically challenged widows, and single women. The new housing and housing
policy was unveiled in 1998 to ensure "shelter for all" and better quality of life for all
citizens by harnessing the untapped potential in the public, private and domestic

50
sectors. The main objective of the policy was to create strong public- private
partnerships to tackle housing problems. Under the New policy, the Government
proposed to give financial concessions, introduce legal and regulatory reforms and
create an enabling environment for the development of the housing sector. The policy
emphasized the role of the private sector as another participant in promoting
investment in land connectivity, housing construction and infrastructure. Ever since
additional emphasis has been placed on private initiatives in housing development.
Private investment in housing has grown rapidly, with the rise of real estate
developers, primarily in metropolitan cities and other rapidly growing townships.

Ninth Five Year Plan (1997-2002)

During this period housing was prioritized as one of the seven principles of
development. Significant efforts were made to introduce a new institutional
mechanism to increase the resources base and increase the Housing distribution in
urban areas. The scope of Indira Awas Yojana was the kutcha houses were expanded
to convert them into pucca or semi pucca houses. Again the Credit cum subsidy
scheme for rural housing was launched to eradicate the shelter less from rural areas of
the country. Fiscal concessions were also introduced along with legislative measures
to encourage investment growth in Housing by Individuals and Corporate.

Tenth Five Year Plan (2002-2007)

The National Common Minimum Program (NCMP) has said that housing for
the weaker sections in rural areas will be increased in a big way. Therefore, the Tenth
Plan had the suggested provision of free Housing only to landless SC / ST families
and shifted to credit-cum subsidy scheme for other BPL families. The repeal of the
Urban Land (Roofing and Regulation) Act, 1976 is an important step towards reform
of the urban land market. After the repeal of the Central Law, many State
Governments have also repealed the state level law.

Eleventh Five Year Plan (2007-2012)

To improve the quality of life in urban areas, the Eleventh Five Year Plan
(2007-2012) emphasizes the need for better housing stock through urban renewal, In-
situ slum improvement and the development of New Housing Stock in existing cities
as well as a new township. In addition, the Bharat Nirman Program has also given

51
priority to end the problem of need for shelter. The program targeted for construction
of 60 lakhs houses from 2005 to 2009. The housing component under the program
was implemented parallel to the Indira Awas Yojana. In Eleventh Five Year Plan, the
focus was on targeting the poorest of the poor, targeting the remaining housing
shortages, among other interventions.

Twelfth Five Year Plan (2012-2017)

The Twelfth Five-Year Plan (2012-2017) emphasizes affordable housing.

Affordable housing is particularly important concern for a weaker group that meets
their needs in the absence of a viable model. India can meet the challenges through a
set of policies and incentives that will bridge the gap between price and affordability.
This will enable a sustainable and economically viable affordable Housing model for
both Government Housing Agencies and Private Developers. India especially needs to
encourage rental housing as an option for the poorest of the poor, who may not be
able to afford the house even for these tasks.

Investment in Housing during Five Year plans

Government investment during five year plan from 1st Five Year Plan to 12th Five
Year Plan:

52
 Table 2.1

Status of Total Investment and Investment in Housing

Five Year Investment (Rs in Crores) Percentage of Housing to

Plan Total Housing Total Plan Investment
1 3,360 1,150 34.23
2 6,750 1,300 19.26
3 10,400 1,550 14.90
4 22,635 2,800 12.37
5 47,561 4,436 9.33
6 1,72,210 19,491 11.32
7 3,14,580 31,458 10.00
8 6,10,000 97,500 15.98
9 8,75,000 1,51,000 17.25
10 12,63,900 7,26,300 57.46
11 24,24,277 8,80,878.1 36.34
12 76,69,807 55,74,663 72.68
Source: 1.Planning Commission, Government of India
2. India’s Five Year plans, Government of India, New Delhi
3. Twelfth Five Year Plan Report

Graph 2.1
Percentage of Investment in Housing to Total Investment

80
70
60
50
40
Percentage
30
20
10
0
1 2 3 4 5 6 7 8 9 10 11 12

Source: 1.Planning Commission, Government of India

2. India’s Five Year plans, Government of India, New Delhi
3. Twelfth Five Year Plan Report
53
 The above Table 2.1 shows the Total Plan Investment in the economy and
Investment in Housing during the Five Year Plan. It is clear from the above that, how
the Government of India has perceived the Housing Sector in the initial year and
subsequent years. The total plan outlay for the economy was Rs.3,360 crores in First
Five Year Plan to increase by Rs.76,69,807 crores in the 12th plan period. Investment
in housing has been increased from Rs1,150 crores in First Five Year plan to
Rs.55,74,663 crores in the 12th Five-Year plan. Financial allocation in housing as a
percentage of the Total Investment in the economy was as highest as 72.68 percent in
the Twelfth Five Year Plan and the lowest was 9.33 percent in the Fifth Five Year
Plan.

Public and Private Investment in Housing during Five Year Plan period

The role of Government in both public sector and private sector investment in
Housing over the Five Year Plans is given in the following table:

Table 2.2
Investment in Housing in the Public and Private Sector
(Amount in crores)
Plan Period Investment in Housing
Public % Private % Total
st
1 Plan (1951-56) 250 21.74 900 78.26 1150
nd
2 Plan (1956-61) 300 23.08 1000 76.92 1300
rd
3 Plan (1961-66) 425 27.42 1125 72.58 1550
th
4 Plan (1969-74) 625 22.32 2175 77.68 2800
th
5 Plan(1974-79) 796 17.94 3,640 82.06 4,436
th
6 Plan( 1980-85) 1491 7.65 18,000 92,35 19,491
th
7 Plan(1985-90) 2,458 32.31 29,000 92,19 31,458
th
8 Plan(1992-97) 31,500 34.44 66,000 67.69 97,500
th
9 Plan(1997-02) 52,000 34.44 99,000 65.56 1,51,000
th
10 Plan (2002-07) 4,15,000 57.14 3,11,300 42.40 7,26,300
th
11 Plan(2007-12) 5,07,318.1 57.60 3,73,560 42.40 8,80,878.1
th
12 Plan (2012-17) 28,90,823 52.11 26,83,840 48.38 55,74,663
Source: 1 Report on Trend and progress of Housing Finance in India, 2003.p.79
2. Plan Documents X Plan (2002-07) and XI Plan (2007-2012)
3. Report of 22nd Standing Committee on Rural Development 2005-06
Ministry of Rural Development, Government of India, New Delhi,
August 2006, p, 17, * Estimation of X Plan Document.
4. Accommodation Times Research, Published on October 13, 2017

54
 Table 2.2 gives the Total Investment for Public and Private Housing during
various plan periods, ie from the Ist Five Year Plan to the 12th Five-Year Plan. As we
can be seen from the table that the Total Investment for housing was Rs 1,150 crore in
the 1st Five Year Plan increased to Rs.55, 74,663. crore in the 12th Five Year Plan.
This shows that the Total Investment in Housing has increased by 4,848 times during
this period. If we check the data on private investment, it shows that it has increased
by 2,982 times i.e. from the Rs. 900 crores in the First Plan to Rs. 26,83,840 crores in
the 12th Plan. Similarly, Public investment figures for housing show that its level of
Rs. 250 crores during the First Five Year Plan raised to Rs. 28,90,823 crores in the
12th Plan, indicates that, it has increased by 11,563 times. Thus, there was a
tremendous increase in the Total Investment for Housing during the Five Year Plan
period. The ratio of private investment to housing from the First Plan to the Ninth
Plan was more than 65.56%, with the highest percentage being 92.35 during the 6th
plan. However, during the last two plans, namely, the 11th and 12th plans, the ratio of
Public Investment has increased compared to Private Investment which means that
during the last 3 Five Year Plans, Public Investment in Housing has become more
effective.

2.5 Major Housing Policies and Programmes in India

Housing in India has been the focus of planners since Independence. In each
the Five Year Plans specific funds allocated for the country's Housing needs.
However, especially from the Seventh Five Year Plan i.e. from 1985 onwards, the
urban housing shortage and slum development programs are getting special focus.

Broadly, the policy framework to be followed for housing in India can be summarized
as follows:

55
 Table 2.3

Major Housing Policies and Programmes in India

Sl.No Name of the Schemes Year of
Launch
01 Indira Awas Yojana 1985
02 National Housing Policy 1988
03 National Housing and Habitant Policy 1998
04 Valmiki Ambedkar Awas Yojana (VAMBAY) 2001
05 Jawaharlal Nehru National Urban Renewal Mission (JNNURM) 2005
06 National Urban Housing and Habitat Policy (NUHHP) 2007
07 Interest Subsidy Scheme for Housing the Urban Poor (ISHUP) 2008
08 Rajiv Awas Yojana (RAY) 2009
09 Affordable Housing in Partnership ( AHP) 2013
10 Rajiv Rinn Yojana 2013
11 Pradhan Mantri Awas Yojana: Housing for All by 2022 2015
12 National Urban Rental Housing Policy (2015) (NURHP) 2015
Source: Reports on Trend and Progress on Housing in India

1. Indira Awas Yojana (IAY) (1985-86): IAY launched in the year 1985-86, the
largest and most comprehensive rural housing program ever launched in the country.
It is a flagship scheme of the Ministry of Rural Development to provide financial
assistance for the construction of housing units to BPL families in rural areas. IAY
was started as a sub-scheme of RLEGP and thereafter continued as a sub-scheme of
the JRY scheme in 1989. The objective of the scheme is to help the weaker section
mainly in rural areas. This was the Government's proactive measure to solve
homelessness. This scheme has been renamed PMAY in the year 2015.

2. National Housing Policy (NHP) 1988: The March 1987 Preamble to the Draft
National Housing Policy (DNHP) recognized shelter as a basic human need for the
first time. This may be considered a first step towards recognizing the right to shelter
or the right to housing, but this particular emphasis was dropped from the draft. The
policy looked at the land, material, finance, technology and targeted poverty
alleviation as part of an integrated and comprehensive solution to Housing. The
Development of the Housing Sector as a whole was emphasized (NHP 1988).

3. National Housing and Habitat Policy (NHHP) 1998: The policy envisages and
emphasized on a major shift in the role of the Government to function more as a
facilitator than as a provider. The objective of the policy was to create surplus housing

56
stock in pursuance of the National Agenda for Governance and facilitate the
construction of two million housing units each year. It also sought to ensure that
housing with ancillary services is treated as a priority sector at the same level as
infrastructure. The Planning Commission suggested amendments to the housing
policy to include the Affordable Housing Program for the urban poor. During the
Ninth and Tenth Five-Year Plans, considerable efforts were made to increase the
resource base and initiate Innovative Institutional Mechanisms to Increase Housing
Distribution in Urban Areas (NHHP, 1998).

4.Valmiki Ambedkar Awas Yojana (VAMBAY) 2001; The Government of India

launched this scheme as a centrally support scheme with an inbuilt subsidy for
undertaking the construction of dwelling units and sanitation units specially focused
on slum dwellers that are economically below the poverty line and belong to socially
disadvantaged groups. The Central Government provides a subsidy of 50 percent and
the balance of 50 percent being arranged by the State Government. Afterward, it was
merged with JNNURM.

5. The Jawaharlal Nehru National Urban Renewal Mission (JNNURM)2005:

was launched in December 2005 to cover the construction of 1.5 million houses for
the urban poor during the mission period (2005–2012). It was launched in
collaboration with various State Governments and Urban Local Bodies, supporting 63
cities across the country. The focus of the program was on improving efficiency,
community participation, and accountability of Urban Local Bodies in the delivery
mechanism of urban infrastructure services.

JNNURM had two sub-missions:

 Basic Services for Urban Poor (BSUP) aims at providing seven

entitles/services i.e. security of tenure, affordable housing, water, sanitation,
health, education, and social security in low-income areas in 63 Mission
Cities.
 The Integrated Housing and Slum Development Program (IHSDP) have
provided the above seven rights and services in towns/cities other than
Mission Cities.

57
6. National Urban Housing and Housing Policy (NUHHP) 2007: The policy
emphasizes the housing and housing sector in the urban context and looks at housing
as a tool for productivity, equity, safe environment, pro-poor delivery of civic services
and shelter as well as employment opportunities and has emphasized bottom-up
planning. The policy has been designed keeping in mind the changing socio-economic
parameters of the urban area and the growing need for shelter and related
infrastructure. It seeks to promote a variety of public-private partnerships to realize
the goal of "Affordable Housing for All", with particular emphasis on the urban poor
(NUHHP, 2007).

7. Interest Subsidy Scheme for Housing of Urban Poor (ISHUP) 2008: This
scheme was launched by MoHUA (earlier Ministry of Housing and Urban Poverty
Alleviation) on 26th December 2008 to improve the affordability of housing credit
among EWS/LIG areas in urban areas. Under the Scheme, an interest subsidy of 5%
p.a. was provided for the entire tenure of the loan (15-20 years) on loans up to ₹1 lakh
extended by Primary Lending Institutions (PLIs) to EWS/LIG beneficiaries. The
maximum loan amount was ₹1 lakh for EWS persons and ₹1.60 lakh for LIG
individuals. The interest subsidy was provided on NPV and upfront basis. The
Scheme was implemented through Banks and HFCs. This plan envisaged the
Appointment of State Level Nodal Agencies (SLNAs) by various States to facilitate
the identification and selection of eligible beneficiaries for effective implementation.

NHB and HUDCO were designated as Central Nodal Agencies (CNAs) for the
implementation of the Scheme. NHB as the Nodal Agency for the said Scheme had
taken various measures to create awareness through wide publicity, sensitization
programs, and coordination with various agencies to facilitate the effective
implementation of ISHUP. This scheme ended on 30-09-2013.

8. Rajiv Awas Yojana (RAY) 2009: To enable the provision of credit to the
Economically Weaker Sections (EWS) and LIG families and to encourage the States
to adopt policies for building a slum-free India. The RAY scheme emerged from the
vision statement of the President of India in 2009, which was placed in the Parliament
for "Slum Free" India". In May 2015, the Rajiv Awas Yojana (RAY) was included in
the Housing for All (HFA).

58
9. Affordable Housing in Partnership (AHP): The Government has set up a part of
RAY in 2013 to augment the affordable housing stock with an outlay of ₹5,000 crores
for the construction of one million houses for EWS/LIG/MIG with at least 25% for
the EWS category. This scheme facilitated the partnership between Various
Agencies/Governments/Parastatals/Urban Local Bodies/Developers to realize the goal
of affordable housing for all.

10. Rajiv Rinn Yojana (RRY): The Ministry of Housing and Urban Poverty
Alleviation (MHUPA), the Government of India has revised the interest subsidy
scheme and renamed it as Rajiv Loan Scheme (RRY) as an additional means to
augment the housing needs of EWS/LIG sections in urban areas. Eligible housing
loan limit from 1 lakh to 5 lakh. Rajiv loan scheme is effective from 01-10-2013.
Under RRY, the loan amount has been revised up to 5 lakh for EWS and 8 lakh for
LIG beneficiaries. However, the interest subsidy is provided up to a maximum of Rs 5
lakh for both categories of beneficiaries.

11. Housing for All by 2022 – Pradhan Mantri Awas Yojana (Urban): Affordable
Housing Scheme, PMAY (U) announced that 50 million houses will be built for the
poor by 2022, of which 30 million will be in rural areas and urban areas. 20 crore in
the mission being implemented during 2015-2022 and provides central assistance to
Urban Local Bodies (ULBs) and other implementing agencies.

Through States/UTs:

a) In situ Rehabilitation of existing slum dwellers using land as a resource through

private partnership

b) The Credit Linked Subsidy Scheme is being implemented through PLIs and
monitored by Central Nodal Agencies such as NHB and HUDCO.

c) Affordable Housing in Partnership

d) Subsidy for beneficiary-led individual house construction / enhancement.

As per the guidelines of the mission, an 'affordable housing project' should

have a minimum of 35% houses for the Economically Weaker Section (EWS)
category. EWS households are those with an annual income of up to ₹ 3,00,000 and a
house having a carpet area of up to 30 square meters. The Low Income Group (LIG)

59
is defined as a residential unit with an annual income of ₹3,00,001 to ₹6,00,000 and a
carpet area of up to 60 square meters. The slum is defined as a compact area of at
least 300 populations or about 60–70 households with poor construction, overcrowded
houses in an unhygienic environment, usually inadequate infrastructure and a lack of
proper sanitation and drinking water facilities. The PMAY provides an interest
subsidy of 6.5% on housing loans up to 20 years for EWS and LIG and has also
recently included interest subsidy, Interest subsidy of 4% for MIG I (6 lakhs to 12
lakhs) at 3% for MIG II (12 lakhs above to 18 lakhs). It also envisages making all
statutory towns slum-free, i.e. preparation of the Slum Free City Plan of Action
(SFCPOA) for the in-site redevelopment of slums.1

Table 2.4

PMAY( U) : Mission Progress

Investment (Central, State and Beneficiary) Approved Rs. 6.53 lakh crores
Central Assistance Committed Rs.1,71,738 crores
Central Assistance Released Rs.76,787 crores
Construction of Houses Completed 38.4 lakhs
Houses Grounded 66.94 lakhs
Beneficiaries under CLSS 12.26 lakhs
Interest Subsidy released under CLSS Rs.27,868 crores
Employment Generation in Jobs 196 lakh Jobs
Source: NHB Annual Report 2019-20

12. National Urban Rental Housing Policy (2015)

Given the magnitude of the housing shortage and the budgetary constraints of
both the Central and State Governments, it is quite clear that public sector efforts
alone will not be enough to meet the demand for rental housing. Due to this situation,
the National Urban Rental Housing Policy (NURHP), 2015 was enacted. It will
enable the legal and regulatory measures like encouraging participation of the private
sector, cooperative, non-government sector, industrial sector (for labor housing), and
services/institutional sector (for employee housing) for the promotion of rental
Housing, such as a multidisciplinary approach. The policy seeks to promote various

60
types of Public-Private Partnerships to promote rental housing in the country which
will act as a catalytic force to achieve the overall goal of housing for all by 2022.

2.6 Role of National Housing Bank

National Housing Bank (NHB) is a development Financial Institution,

established in 1988 under an Act of Parliament, viz the National Housing Bank Act,
1987 (Central Act No. 53 of 1987). NHB is to act as a premier agency for promoting
Housing Finance Institutions and providing finance and other assistance to such
Institutions. The NHB was set up to perform three broad functions vi,. - Regulation
and Supervision, Financing and Promotion, and Development of Housing Finance
Companies (HFCs).

As per the provisions of the National Housing Bank Act, 1987, the powers of
registration, regulation, and supervision of Housing Finance Companies (HFCs) were
vested in the National Housing Bank (NHB). However, in the context of amendments
made to the National Housing Bank Act, 1987 under the Union Budget
Announcements for 2019-20, the regulatory powers of the National Housing Bank
(including registration of HFCs) over Housing Finance Companies (HFCs) have
shifted to Reserve Bank of India (RBI) with effect from August 9, 2019. After the
above transfer, HFCs will be treated as one of the categories of Non-Banking
Financial Companies (NBFCs) for regulatory purposes. RBI had announced that it
will review the existing regulatory framework applicable to HFCs and come up with
revised rules in due course (draft guidelines announced on June 17, 2020). In the
meantime, until the RBI issues a revised framework, HFCs will continue to comply
with the directions and instructions issued by the NHB. The NHB continues to
supervise the HFCs and the HFCs continue to submit various returns to the NHB as
hitherto. The grievance redressal mechanism for HFCs also continues with National
Housing Bank. NHB's multi-pronged approach to institutional and market
infrastructure development has led to the expansion and sustainability of the housing
sector.

Mission of NHB: To harness and promote the market potential and to serve the
housing needs of all segments of the population with focus on low and moderate
income of housing.

61
Vision of NHB: “Promoting Inclusive Expansion with stability in the Housing
Finance Market.”

Objectives of NHB

The National Housing Bank (NHB) has been set up to achieve the following
objectives.

 To promote a sound, healthy, inclusive and viable Housing Finance System to

cater all segments of the population and to integrate the housing finance
system with the overall National Financial System;
 To develop network of dedicated Housing Finance Institutions to serve
adequately in all regions and sections of the society.
 To facilitate finance and other resources for the development of Housing and
create a framework for Institutions for enhancing the quality of credit and
affordability.
 To regulate and supervision of activities of Housing Finance Companies based
on the mandate provided under the National Housing Bank Act, 1987.
 To innovate and develop new products in Housing Finance to cater the
specialized needs of different categories of the population.
 To create an appropriate environment for the development of sustainable
habitat and Housing Finance System through eco-friendly housing using
energy efficient and sustainable practices by partnership and collaboration
arrangements with domestic and international agencies.

Financial Highlights of NHB

The National Housing Banks financial year starts from Ist July to 30th June. The
following Table 2.5 shows Financial highlights of NHB

62
 Table 2.5
Financial Highlights of NHB
(Rs in crores)
5 Years Average

2018-19i
2015-16

2016-17

2017-18

2019-20
Growth

rage

rage
amo
rate
Ave

Ave

unt
Capital 1450 1450 1450 1450 1450 1450
Reserve 5139.56 4776.52 6360.75 6824.52 7022.96 9.078 6024.86
(-7.06) (33.17) (7.29) (2.91)
Re-finance 21687 22759 24921 25177 31258 4.178 25160.4
Disbursements (4.94) (9.50) (1.03) (1.24)
Loans and 53573 54385 57684 69805 81750 11.43 63439.4
advanced (1.52) (6.07) (21.01) (17.11)
Total Assets 59262 58254 63273 75591 90160 11.42 69308
(-1.68) (8.62) (19.47) (19.27)
CRAR % 19 `17 19 16.01 12.74
Source: Annual Reports of NHB
Figures in parentheses indicate percentage growth over the previous years

Table 2.5 shows the Financial highlights of NHB, such as capital, reserves,
refinance disbursements, loans and advances, and NHB's total assets. It can be seen
from the table that, except for the capital and reserve, all items are showing an
increasing trend over the years. The capital of NHB remains the same (ie Rs.1450
crore) during the study period. The average rate of growth of various items is also
shown in the table. Among various heads, the 5-year average growth rate for the item
"Loans and Advances" of National Housing Bank is higher with an average growth of
11.43% (average amount is Rs 63,439.4 crores). The next highest growth rate is found
in NHB's total assets, with a 5-year average growth rate of 11.42% (the average
amount is Rs 69,308 crores).
As regards the refinance disbursements made by NHB, in 5 years with an
average growth rate of 4.178% with 5 years average amount of Rs. 25,160.4 crores.
Considering the reserves, have increased over the years except in the year 2016-17, It
was also showing an average growth rate of 9.078% over 5 years with an average
amount of 6024.86 crores. Both the values reflect the strong refinance disbursement
and reserve position of NHB. Keeping in view the capital to risk assets ratio, NHB
maintains a strong CRAR which stands at over 12%. NHB has the highest CRAR of
19% in the years 2015-16 and 2017-18. The CRAR stood at 12.74% in the year
(2019-20) respectively.

63
 Considering the Individual items, the rate of increase of reserves is higher
during the year 2017-18, with an increase of 33.17% over the previous year and a
negative growth rate i.e 7.06 in the year 2016-17. The Refinance disbursements made
by NHB is increasing trend. The highest percentage of growth was in the year 2017-
18 with a percentage of 9.50%. During the year 2019-20, the re-finance disbursement
reached the highest amount of Rs.31258 crores. NHB is also providing loans and
advances to housing finance agencies for the development of housing stock in the
country. It can be seen from the table that, the amount of Loans and Advances are
increasing year by year, the percentage of increase in the year 2018-19 is higher with
an amount of 69805 crores (% change of 21.01%). In the year 2019-20, the amount of
Loans and Advances granted by NHB has reached a maximum of Rs 81750 crores. At
the end of 31 March 2020, NHB had total assets of Rs 90,160 crores. Overall, it is
understandable that, NHB has a very strong financial base and each item that reflects
the financial stability.

Profitability Position of NHB

After identifying the Financial stability of the NHB, it would be worthwhile to
take a look at profitability position of the NHB. The following Table 2.6 shows the
profitability position of NHB
Table 2.6

Profitability position of NHB

(Rs in crores)
5 Years Average
Particul

2015-16

2016-17

2017-18

2018-19

2019-20

growth
ars

Average
Average
rate
Total 4518 4430 5262 5033
4213 4.93 4691.2
Income (7.24) (-1.95) (18.78) (-4.35)
PBT 1159.74 1305.8 1100.42 1226.47 536.67 -11.98 1065.82
(12.59) (-15.73) (11.45) (-56.24)
Provision 367.89
458.27 349.31 493.5 341 2.79 401.99
for tax 24.57 (-23.78) (41.28) (-30.90)
PAT 791.85 847.53 751,11 732.97 195.67 -14.33 663.81
(7.03) (11.38) (-2.42) (-73.30)
Source: Annual Reports of NHB
Figures in parentheses indicate percentage of growth over the previous years

64
 Table 2.6 shows the profitability indicators of NHB over the last five years.
Profitability has been estimated by considering the items like total income, profit
before tax, and profit after tax, etc. The Average Growth of total income for 5 years is
Rs. 4691.2 crores with a growth rate of 4.93 as shown by the 5years average prices.
NHB has given a 5Years average PBT of Rs. 1065.82 crore (average negative growth
rate 11.98) and the 5Years average PAT is Rs. 663.81 crores (average negative
growth rate 14.33%) in the study period. Taking individual items into account, the
percentage of change in Total Income was higher in the year 2018-19 showing an
increase of 18.78% over the previous year, amounting to Rs 5262 crore. In the year
ended 30 June 2017, NHB posted the highest PBT and PAT amount of Rs. 1305.8
crores and Rs. 847.53 crores respectively.

Re-finance Disbursements by NHB

National Housing Bank provides funds to the housing sector through its
refinance schemes for Banks, Housing Finance Companies, State Level Apex Co-
operatives and Housing Finance Societies. One of the objectives of NHB is to
provide refinance facilities to eligible Institutions in the country.

Table 2.7
Re-finance Disbursements of NHB
(Rs. in crores )
Sl.No Year Disbursements Percentage of Cumulative
Change Disbursements
01 2010-11 12035 -- 70,697
02 2011-12 14390 19.57 85,087
03 2012-13 17542 21.90 1,02,629
04 2013-14 17856 1.79 1,20,485
05 2014-15 21847 22.35 1,42,332
06 2015-16 21590 -1.18 1,63,922
07 2016-17 22684 5.07 1,86,606
08 2017-18 24921 9.86 2,11,527
09 2018-19 25177 1.03 2,36,704
10 2019-20 31258 24.15 2,67,962
Average 20,930 11.61
Source: Annual reports of NHB

65
 Chart 2.3

Refinance Disbursements of NHB

40000

30000

20000

10000

0
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20

Source: Annual reports of NHB

The refinance disbursements made annually by NHB each year from 2010-11 to
2019-20 are given in Table 2.7. The amount of disbursement of Rs. 31,258 crores
during 2019-20 represent the highest annual refinance disbursements made by NHB,
showing an increase of about 24.15 percent over the previous year's refinance
disbursements. The average annual disbursements rate has been found to be 11.61%,
as shown by the average growth rate figure. The table also shows that NHB has an
average of Rs. 20,930 crores per annum refinance disbursements during the study
period. NHB has made cumulative refinance disbursements of Rs. 2, 67,962 crores to
various housing finance institutions, since its inception.

Institution wise Re-finance made by NHB

It would be worthwhile to identify the present trend prevailing in institutional
refinance. Table 2.8 shows the refinancing disbursements made by NHB over five
years starting from 2015-16 to 2019-20 to various institutions
.

66
 Table 2.8
Institution wise Re-finance made by NHB

(Rs. in crores)
Primary Average Average

2015-16

2016-17

2017-18

2018-19

2019-20

Total
lending Growth Growth

Institutions in (%) in (Rs)

HFCs 10,852 16,779 11,508 21736 27551 70.39 17685

SCBs 10,275 5,696 13,283 3300 1550 27.15 6821

Others 463 209 130 141 2157 2.46 620

Total 21590 22684 24,921 25,177 31,258 1,25,630 100 25126

Source: Annual Reports of NHB

Figures in parentheses indicate percentage of growth over the previous years

From the above Table 2.8, it is observed that the NHB refinanced to HFCs is
Rs 10,852 crores in 2015-16 and Rs. 27551 crores in 2019-20 with an average amount
of Rs.17685 crores and an average percentage of 70.39 of the total amount. In the case
of SCBs, it was refinanced from Rs.10,275 crores in 2015-16 and Rs 1550 crores in
2019-20, with an average amount of Rs.6821 crores and an average percentage of
27.15 of the total and others, NHB refinance was Rs 463 crores in 2015-16 to Rs.2157
crores in 2019-20, with an average amount of Rs.620 crores and average percentage
2.46 of the total during the study period.

2.7 Housing Finance Companies

A Housing Finance Company may be defined as a company that primarily

carries on the business of housing finance or has the main object clause in the
Memorandum of Association for carrying on the business of providing finance for
housing. So basically HFCs is a company registered under the Indian Companies Act-
2013 or previous Act 1956. To start a housing finance business and Housing Finance
Company is necessary to have the following:

1. Certificate of Registration from NHB

2. A Minimum net owned fund of Rs. 20 crores

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The Housing Finance Companies are classified in to Public sector and Private sector
and Deposit accepting HFCs and Non deposit accepting HFCs.

Public Sector and Private Sector Housing Finance Companies

The registered HFCs are classified into Public sector and Private sector

Table 2.9

Public Sector and Private Sector Housing Finance Companies

Sl.No Year Public Private Total Percentage
Limited Limited of Growth
1 2015-16 63 08 71 ----
2 2016-17 66 17 83 16.90
3 2017-18 73 18 91 9.64
4 2018-19 79 20 99 8.79
5 2019-20 77 24 101 2.02
5 Years average growth rate 9.34
Source: Reports on Trend and Progress of Housing in India

Chart 2.4
Public Sector and Private Sector Housing Finance Companies

90
80
70
60
50 Public Limited
40 Private Limited
30
20
10
0
Source: Reports on Trends and progress of Housing in India

There has been a steady growth in the Housing Finance Industry. The number
of housing finance companies has been increased from 71 to 101, in the case of public
housing finance companies has been increased from 63 to 77 and in the case of the
private sector 8 to 24 companies. The overall increased of 142 percent during five
years period and average growth of 9.34 percent of HFCs during the study period.

68
Public Deposit Accepting and Non Deposit Accepting HFCs

Housing Finance Companies to whom Certificate of Registration (CoR) has

been granted in terms of the provisions of Section 29A have been classified by the
NHB in terms of Liability into CoR with accepting deposits from the public and CoR
without accepting deposits from the Public. The number of CoR accepting deposits
from the public is from 25 to 17, an overall decrease of 32 percent, and non-accepting
deposits from public HFCs increased from 46 to 84 during five year period. The
overall increased of 142 percent over five years period and average growth of 9.34
percent of HFCs during the study period.
Table 2.10
Public Deposit Accepting and Non Deposit Accepting HFCs

Sl.No Year Public Public Not Total Percentage

Accepting Accepting of growth
Deposit HFCs Deposit HFCs
1 2015-16 25 46 71 ----
2 2016-17 18 65 83 16.90
3 2017-18 18 73 91 9.64
4 2018-19 18 81 99 8.79
5 2019-20 17 8 101 2.02
5 Years average growth rate 9.34
Source: Reports on Trend and progress of Housing in India

Chart 2.5

Public Deposit Accepting and Non Deposit Accepting HFCs

120
100 Public Accepting Deposit
80 HFCs
60 Public Not Accepting
40 Deposit HFCs
20 Total
0
1 2 3 4 5

Source: Reports on Trend and progress of Housing in India

69
Market share in Retail Housing Loan

The housing sector is becoming demand driven and market-oriented. The

respective market shares of commercial banks and Housing Finance Companies in the
last five years are shown in Table 2.11.
Table 2.11
Market Share in Retail Housing Loan
(Figure in percentage)
Year Commercial HFCs
Banks
2015-16 64 36
2016-17 64 36
2017-18 62 38
2018-19 64 36
2019-20 67 33
Average 64.2 35.8
Source: Annual Reports of NHB

Graph 2.2

Market share in Retail Housing Loan

Market Share in Reatil Housing Loan HFCs

Market Share in Reatil Housing Loan Commercial Banks

36 36 38 36 33
64 64 62 64 67

2015-16 2016-17 2017-18 2018-19 2019-20

Source: Annual Reports of NHB

From the above Table 2.11 shows that the commercial banks increased 64
percent in 2015-16 to 67 percent in the year 2019-20 and the average market share of
commercial banks was 64.2 percent during the study period. HFCs decreased from 36
percent in the year 2015-16 to 33 percent in the year 2019-20 and the average market
share was 35.8 percent during the study period.

70
2.8 Commercial Banks and Housing Finance

Scheduled commercial banks have always been offering housing loans to their
customers but it was not until the late 1990s and early 2000s that they made a solid
footing in the industry. The market boomed due to the rapid increase in the number of
entities offering housing finance. This helped in deepening existing markets and
expanding into new markets, especially in Tier II and Tier III cities in the country. In
the late 1990s and early 2000s, the country witnessed good economic growth which
fueled the growth of the Housing industry and transformed the Housing Finance
Sector. This growth of the economy and the growth of the Housing stock through
private builders being active in the urban centers led to the overall development of
Housing Finance Industry in the country. Over the years, the housing loan portfolio of
SCBs has grown significantly, supported by the policies of the Government of India
and interventions by the Reserve Bank of India and the National Housing Bank.
However, at present Banks are the major lenders to the Housing Sector and
Institutional Housing Financing in India are dominated by Commercial Banks. As of
March 31, 2020, home loans outstanding by HFCs and Commercial banks stood at
₹20 lakh crore, of which nearly two-thirds (67%) were in bank accounts. The annual
growth of credit of scheduled commercial banks in India indicates the share of loans
for housing overall. As a result of the concerted efforts of NHB, RBI, and Central
Government towards the development of stable housing finance, banks now have a
very large housing loan portfolio and are quite optimistic about this product segment.
Also, banks have been able to manage overall NPA levels through their risk
monitoring and responsible lending, giving them a strong reason to continue lending
to the sector.

2.9 Co-operative Banks.

A Co-operative Bank is a Government supported Financial agency in India,

which is organized and managed towards cooperation, self help, and mutual
assistance. This works with a 'no profit and no loss' model. A co-operative bank like
any other bank in the country performs all basic functions like borrowing and lending.
Initially, co-operative banks were set up to supply money to rural credit, especially
lenders. Today they cater to various needs like agriculture and other allied activities,
trade, and industry in rural-based industries and to a lesser extent in urban centers. A

71
Co-operative Bank offers home insurance and is designed to ensure borrowers homes
are as simple as possible. Co-operative banks deploy funds from a shared pool of
resources to provide for the various needs of their members. In the Indian scenario, a
lot of reluctance has been seen by these Co-operative Banks, to provide loans for
housing finance. The main reason for this is that the high risk and irregularities in
giving housing loans from the general fund. Hence the role and importance of Co-
operative Banks are becoming non-existent in Housing Finance these days.

2.10 HUDCO

Housing and Urban Development Corporation Limited established on April

25, 1970, is a wholly-owned organization of the Government of India. The
Government Institution channeled its housing finance to HUDCO as a financial
technology Institution, to bring resource power to Housing Boards and Development
Agencies under the jurisdiction of the State Government with limited resources.
HUDCO provided houses to three lakhs families in India in the projected financial
year 1986 and also, most of the allocation was given to LIG. In addition, LIGs had
lower interest loans and longer repayment periods than HIGs. This means subsidy in
favor of LIG. Housing Boards, slum Improvement Agencies and other Government
Development Institutions were largely dependent on HUDCO. The bulk of the funds
were provided to HUDCO by LIC and GIC. In addition to the Central Government
allocates equity capital to HUDCO through Five-Year Plan provisions. Since 1987,
the Central Government has enabled HUDCO to receive more and more money in the
market fund. HUDCO receives applications for supporting projects from Housing
Boards and Development Agencies under the jurisdiction of State Governments.
These projects are evaluated for their technical and financial viability. Then, Loan
agreements are signed and HUDCO monitors the performance of the project. The
distribution of wealth among the States is formula-based. In recent years HUDCO has
expanded activities like; running training courses in housing administration costs with
affordable building technology relevant to low-income housing.

Objectives of HUDCO

1. To provide long-term finance for the construction of houses for residential

purposes or undertake under Urban Development Programmes.

72
 2. To finance or work wholly or partly for the establishment of new or satellite
cities.
3. To subscribe to the bonds/debentures issued by State Housing Boards,
Development Authorities, Improvement Trusts etc., especially, for housing
financing and urban development programmes.
4. To use funds received from Government and other sources, in the form of
grants or otherwise, to finance and run housing and urban development
programmes.
5. To use funds in providing, assisting, setting up, assisting and providing
consultancy services for planning and designing works relating to housing and
urban development in India and abroad.
6. To finance or act for the establishment of Industrial enterprises of building
materials.
7. To undertake venture capital funding in the housing and Urban Development
Sectors, to facilitate innovations and to invest in and/or subscribe to
shares/units etc. of venture capital funds promoted by
Government/Government agencies.
8. For establishment of mutual funds for housing and urban development and/or
investment in and/or subscribe units of mutual funds promoted by
Government/Government Agencies.

HUDCO provides loans for projects related to water supply, roads and
transport, power, emerging sectors, commercial infrastructure (shopping centers,
market complexes, mall-cum-multiplexes, hotels, and office buildings), social
infrastructure, sewerage, drainage, and solid waste provides loans for Management
and Smart Cities. It also provides loans to Central and State Governments and
Agencies for residential development. As of December 2020, HUDCO had financed
the construction of 1.96,19,532 Housing units mainly for LIG, EWS, MIG, and HIG
categories.

The Performance of HUDCO from 2015-16 to 2019-2020

The Table 2.12 shows the performance of HUDCO over the last five years.
The performance has been assessed by considering the items like; No of schemes,
Gross loan sanctioned, the amount released, and dwelling units. The number of

73
schemes has been decreased from 2015-16 i.e 202 to 50 in the year 2019-20. The
gross loan sanction was fluctuating from Rs. 30,774 crores in the year 2015-16 to
Rs.19,942 crores in the year 2019-20 during the study period. The amount released by
HUDCO was increased from 2015-16 to 2018-19 i.e Rs. 8,250 crores to Rs. 31,009
crores and again it was decreased in the year 2019-20 Rs. 10,121 crores and year-wise
dwelling units were also fluctuating from 4,57,879 units in the year 2015-16 to
3,07,277 units in the year 2019-20 during the study period

Table 2.12

The Performance of HUDCO

(Amount in Crores)
Years No. of Schemes Gross loan Amount Dwelling
Sanctioned (Rs) Released (Rs) Units
2015-16 202 30,774 8,250 4,57,879
2016-17 178 31,862 9,145 2,71,498
2017-18 116 38,648 16,565 15,48,602
2018-19 77 34,452 31,009 20,68,151
2019-20 50 19,942 10,121 3,07,277
Source: Housing.com/news/HUDCO.

2.11 Major Housing Finance Institutions

Housing Development Finance Corporation Limited (HDFC)

Housing Development Finance Corporation Limited (HDFC) was established

in 1977 as one of the largest provider of Housing Finance in India. The company was
established with an aim to address the housing shortage in the country. They provide
finance for construction of residential houses, purchase of land, home improvement
etc. The company was promoted by Industrial Credit and Investment Corporation of
India (ICICI). Over the years, the company has expanded to establish 585 offices as
on 31 March 2020 across the country. Over the years, they have served over 77 lakhs
customers since inception. Internationally it has set up 3 offices in Dubai, London and
Singapore for the purpose of providing loans to NRIs and persons of Indian Origin.

74
LIC Housing Finance Limited (LIC HFL)

LIC Housing Finance is established in 1989 as one of the pioneers of Housing

Finance Institutions and one of the largest housing finance companies in India. Here
individuals can get loans for home purchase, construction, expansion, repair, purchase
of plot, etc. Apart from home loan, LIC HFL also offers loan against property, loan
against securities, and loan under rental securitization. The company has its presence
across the country with 282 marketing offices. Over the years they have served over
27, 70,628 customers since from inception. The company since from inception given
Rs. 3,73,699.62 crore in individual housing loans as on 31 March 2020.5

ICICI Home Finance Company Limited

ICICI Home Finance Company Limited incorporated in 1999 under the

Companies Act 0f 1956. ICICI is the largest Housing Finance Company in India. It
offers various types of home loans for its customers whose tenure can be up to 30
years. The home loan interest rate is linked with ICICI Bank Floating Reference Rate
(FRR/PLR). It has 139 operational branches at different locations and a total of 1,272
employees are working as on 31 March 2020. The growth of loans under management
has increased from Rs.133,330.7 million in 2018-19 to 164,349.7 million in the year
2019-20.

PNB Housing Finance Limited

PNB Housing Finance Limited (PNB Housing) is a Housing Finance company

promoted by Punjab National Bank (PNB) established in 1988. It offers a wide range
of loans for purchase/construction of property to Resident Indians as well as NRIs. It
also provides housing finance for repairs, repairs and enhancement of fixed assets.
PNB Housing Finance is a housing finance company taking deposits. In this way they
extend both credit and deposit financial services in their area of operation. PNB
Housing Finance has come a long way in the last 3 decades. They crossed Rs. 83,346
crore in assets under management in 2020 with deposit crossing 16,000 crore in the
same year. The company has a strong presence of 105 branches, 28 outreaches and 23
hubs across and 64 cities across the country. As on 31 March 2020, 1549 employees
are working.

75
Dewan Housing Finance Corporation Limited (DHFL)

The company was incorporated in the state of Maharashtra on April 11, 1984
in the name of Dewan Housing Finance & Leasing Company Limited and received
the Certificate of Commencement of Business on April 26, 1984. The name of the
company was changed to Dewan Housing Development Finance Limited and a new
certificate was obtained on 26th September. The company made provision for Housing
Finance Leasing of Commercial and Residential premises to Individuals, Co-operative
societies, Corporate Bodies or their nominated employees, group of persons, etc., and
to reputed companies. It is one of the largest Housing Finance Solution providers
spread across the country with an extensive network of 182 Branches, 99 Micro
Branches and there were 2179 permanent employees and 2,907 outsourced employees
are working as of March 31, 2020

GIC Housing Finance Limited (GICHFL)

GIC Housing Finance Limited was incorporated on 12th December 1989 as

'GIC Griha Vita Limited'. The name was changed to its current name through a new
certificate of incorporation issued on 16th November 1993. The primary business of
GICHFL is to provide housing loans to individuals and persons/entities engaged in
construction of houses/flats for residential purposes. GICHFL has always believed
that its success and growth depend on adhering to fair and ethical lending policies
which are customer friendly, as well as to create wealth for its shareholders. GICHFL
has total number of offices as on 31 March 2020 is 75 offices across the country with
strong market team and during the year company sanctioned Rs.1,849 crores and
disbursed Rs. 1790 crores under ‘Apna Ghar Yojana’ (loan to Individuals ).

Can Fin Homes Limited (CFHL)

Can Fin Homes Limited (CFHL): Can Fin Homes Limited is another large
company with a wide network in the Indian housing finance market. Can Fin Homes
Limited is a south based housing finance company, established in the year 1987. It
was established under the sponsorship of Canara Bank and around 70 percent of its
branches are located in the south part of the country. The company has 198 branches
and disbursed loan of Rs.5481 crores as on 31st March 2020 in different parts of the

76
country and offers housing loans and Non Housing Loans. It provides loans for
various purposes like construction of houses, renovation of house, extension of house
etc.

2.12 Housing Finance in Hyderabad Karnataka Region

In Hyderabad Karnataka region (renamed as Kalyan Karnataka) of the Indian

state of Karnataka which was part of the Kingdom of Hyderabad ruled by the Nizam
and Madras Presidency of British India. The Region comprises six districts namely,
Bidar, Yadgiri, Raichur, Koppal, Kalaburagi, and Ballari. The Northeast Karnataka
Region is the second-largest arid region in India. The largest city in the region is
Kalaburagi and it is a Divison of all six districts. The vicious cycle of severe drought,
unemployment, and poverty has rendered Hyderabad Karnataka the most
underdeveloped region in Karnataka. The special status is granted by the central
Government through Article 371(J) for reservation in education and employment. The
HK region is progressing in many fields such as education, agriculture, industry,
trade, commerce, and banking. The total population consists in the Hyderabad
Karnataka region as per the 2011 census was 7,95,89,04, which consists of 18.30
percent of the total population of Karnataka. The total household as per the 2011
census consists of 16,39,566 households for six districts. The Government of
Karnataka introduced many schemers to solve the housing shortage in this region such
as Pradhana Mantri Awas Yojana Urban, Dr. B R Amedkara Nivas Yojana, Vajpayee
Urban Housing Scheme Regular, Devaraj Urs Housing Scheme Urban and Rural
schemes such as Basava Housing Scheme, Devaraj Urs PMAY(G) and Karnataka
Housing Board is doing an excellent job in this areas. The total amount spent for all
these schemes was Rs. 2, 98,993.39 for the year 2019-20.

In the HK region LICHFL, HDFC, DHFL, SBI and CANARA BANK,

provide loans to individuals for the purchase, construction repair and renovation of
residential units and commercial units. Apart from these many other Institutions are
also very actively involved in Housing Finance.

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2.13 Conclusion

The various Housing Finance Institutions discussed above are doing well
according to their objectives in the field of Housing Finance. The demand for housing
is rising day by day. Due to Housing Finance, the housing shortage may come down
in near future but still the housing problem continues to exist, posing a challenge to
the Government. The prospects of the Housing Finance Sector to a large extent
depend on the policies and programs adopted. The growth prospects look promising
due to the necessity of the housing requirement, the velocity of growth will be
however, determined by the capability of the sector to adapt itself to the reforms
process and efficiency in the management of funds.

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References

1. Chandrasekar V (2010) Housing Finance and Housing : A View from India

and Beyond India
2. Reports on Trends and progress of Housing in India.
3. Annual report of National Housing Bank 2019-20, pp125 -126
4. www. thehindubusinessline .com
5. www.housinghudco.com
6. HDFC Annual Report 2019-20, p 83.
7. LICHFL Annual Report 2019-20, p 48
8. ICICI Home Loans Annual Report 2019-20
9. PNB Housing Finance Ltd Annual Report 2019-20
10. GIC HFL Annual Report 2019-20 p 20
11. Canfin Annual Report 2019-20, p 35
12. www.kalyankarnataka .com
13. District statistical glance
14. www.hdfc.com
15. Annual Reports of NHB

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