Professional Documents
Culture Documents
HARISH KHARE
SR. MANAGER - DEVELOPMENT FINANCE
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AGENDA
• Why have PPPs – Relevance to Housing
• HDFC Snapshot
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Why do PPPs Make Sense?
Public Private Partnerships let Public Sector and Business do what they do Best!
• Private Sector
– Innovation, Use of Technology
– Professional Management
– Quality Assurance
– Efficiency and Speed
– Maintenance Practices
– Financing linked to Viability
– Sustainability and Scalability
• Public Sector
– Policy Setting
– National Planning
– Regulation and Governance
– Looking after Public Interest
– Facilitating Economic Growth and Development 3
Affordable Housing: Relevance of PPPs
• PPP is emerging as an efficient model for delivery of services across sectors.
• A recent study conducted by Knight Frank / NAREDCO suggests that affordable housing
presents a commercial opportunity worth Rs. 5 lac crore.
• 11.8 m dwelling units have to be built by 2014 across 37 cities, 90% EWS / LIG
• Financial resources available to government are scarce and need to be optimised.
• PPP approach allows state agencies to overcome resource deficit, improve cost recovery and
increase supply of houses based on demand.
• The public sector owns, controls and regulates the use of land which is the most valuable
resource for any housing project.
• Land, Incentive FSI, TDR, JNNURM grant and Budgetary resources are all elements
controlled by govt. authorities and used judiciously for maximising the contribution of the
private developer under the PPP framework.
• Lower margins are compensated by huge volumes to derive profits.
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AGENDA
• Why have PPPs – Relevance in Housing
• HDFC Snapshot
5
E.g.’s of PPP in Affordable Housing
• Bengal Ambuja Housing Development Ltd.
– A JV between Gujarat Ambuja Cements Ltd. and West Bengal Housing Board
– Township development in Kolkata suburbs, Asansol Durgapur and Bardhaman
– Houses priced at Rs. 2.5 lac to Rs. 6 lac for the benefit of LIG and MIG
• Dharavi Slum Redevelopment, Mumbai
– Asia’s biggest in-situ slum rehabilitation scheme
– Private developer undertakes the scheme with incentives from SRA / BMC
• SEWA’s Parivartan Project, Ahmedabad
– Provision of basic infrastructure and linkages in Ahmedabad slums
– Tripartite arrangement involving SEWA Bank, Community and AMC
• JNNURM funded slum redevelopment schemes across India
– E.g. Pimpri Chinchwad, Nagpur, DDA Tehkhand etc.
• New Town, Rajarhat, Kolkata:
– Shapporji Pallonji and West Bengal Housing Infrastructure Devt. Corp. Ltd.
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Illustration of a PPP model - Rajasthan
• New Housing Policy of the Govt. of Rajasthan promotes PPP
• 75,000 houses (60% of budgeted target) for EWS / LIG through PPP
• Locations: Global city, Neemrana, Greater Bhiwadi and New Jaipur
• (1) Private Developer on Private Land:
– Developer constructs G+3 EWS / LIG flats on 25-40% land owned by him
– The se flats handed over to Govt. at pre-determined price of Rs. 750 per sq. ft.
– Developer gets additional FAR, twice the permissible limit on entire plot
– Additional FAR can be utilised on remaining plot area or exchanged for TDR
– Waiver of EDC, Plan approval fees, Conversion charges; lower stamp uty
• (2) Private Developer on Govt. Land / Acquired Land
– 50% of the land earmarked for construction of EWS / LIG flats
– Bids invited, Developer offering maximum no. of (free) EWS / LIG flats selected
– Developer free to construct and sell MIG / HIG flats on remaining 50% land
• (3) Slum Redevelopment with participation of Private Developer 7
Slum Rehab. in Mumbai under PPP f/w
• 60% of Mumbai’s population lives in slums
• Slum Rehabilitation Authority was established in 1990
– Slum lands treated as a resource offered by SRA / MCGM / MMRDA
– Developer provides free homes to ‘eligible’ slum dwellers
– A slum structure existing before 1995 is eligible for redevelopment; tenement
size: 269 sq ft
– Developers need approval of 70% of slum dwellers and submits the proposal to
the Slum Rehabilitation Authority
– Either in-situ development or slums are relocated if land is required for
infrastructure purposes
– Incentive FSI and TDRs given to developer, slum resettled, balance land
developed and sold commercially
– Profits from open market sale cross subsidises free housing
• Over 400 slum rehabilitation schemes in progress in Mumbai
• Slum resettlement initiatives need community involvement
• Commercial viability of SRS projects varies between slums at prime locations to
those that are in “difficult areas”.
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Funding of Slum Upgrading Projects
• HDFC has financed rehabilitation housing, Infrastructure
and basic services for slum communities and pavement
dwellers through urban NGOs and CBOs.
• Construction Finance / Project Finance amounting to
over Rs. 300 crore disbursed for SRA schemes being
implemented by private developers in Mumbai
• Project financing of EWS / LIG housing projects (e.g.
VAMBAY schemes) of urban development authorities
and municipal corporations.
• Mixed experiences and concerns regarding scaling up.
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AGENDA
• Why have PPPs – Relevance in Housing
• HDFC Snapshot
10
Scope for PPP in Housing Finance
PUBLIC - PRIVATE PARTNERSHIP as against:
• PUBLIC – PUBLIC PARTNERSHIPS
– GOI’s Housing Subsidies through Urban Bodies / Dist.Auth. / Panchayats
– HUDCO’s Loan Schemes for EWS / LIG (e.g. VAMBAY)
– NHB’s Refinance to PSU Banks / RRBs (GJRHFS, Rural Housing Fund)
– NABARD’s Refinance to RRBs, Co-operative Banks
• PRIVATE – PRIVATE PARTNERSHIPS
– HFCs / Pvt. Sector Banks Lending to MFIs / NGOs / CBOs
– Housing Microfinance Product of Leading MFIs (SKS, UJJIVAN, BASIX)
– HFCs offering low-income housing finance (e.g. MHFC, GRUH, DHFL)
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Public v/s Pvt. – Anomalies in HF
Traditionally the scope for PPP has been restricted to:
• Channeling funds from Apex Banks / FIs in public domain to Credit
Intermediaries in Private domain i.e. NGOs / MFIs etc.
• The funding mechanisms deployed under public-public initiatives are
not market based and hence may not be sustainable in long term.
• Conflicts between Public - Public approaches vis-à-vis Private - Private
approaches: Market linked v/s Subsidy oriented. This may create
disparities at the ground level leading to delinquencies.
• Outreach and quantum through Govt. / Public sector interventions far
exceeds the presence of formal private sector financing.
• However, given the huge shortage in housing stock, multiple and
diverse approaches from different stakeholders need to be encouraged.
• Worth exploring Govt. as a facilitator by leveraging subsidies with
private capital to increase outreach and supply. 12
GOI Initiatives in Rural EWS Housing
– Majority government initiatives have been targeted at very low income / below poverty line
• Indira Awas Yojana (IAY) is a subsidy based program targeted at BPL households for new unit
construction, subsidy being Rs. 35,000/- (over 15M units financed since 1985–1986)
• Varied State based housing schemes initiated to augment central government schemes
– Gujarat under Sardar Awas Yojana has increased outlay per housing unit under the IAY to Rs. 40,000
– Andhra Pradesh and Karnataka have independent housing schemes targeted at specific rural
communities
– Additional funds for such schemes are drawn as loans from HUDCO; typically low recovery rates
– NHB administered Golden Jubilee Rural Housing Scheme provides refinance to banks / HFCs
– NABARD’s
Refinancing refinance scheme
schemes of NHB under
& NABARD ‘Non-Farm
have the Sector’
following eligibility for Banks, Co-op. Banks, RRBs, ADFCs
criteria:
NABARD’s Refinance NHB’s Refinance (GJRHFS)
– => Type of PLI Net NPAs (ceiling) Type of PLI Net NPAs (ceiling)
SCBs 5% HFCs 5%
RRBs 8% RRBs 7.5%
Coop. Banks 10% SCBs & Coop. Banks 10%
– Scheduled
Sl. No. Commercial Banks lending for rural housing is approx.
Particulars (Rs. in10% of total mortgage lending
crore)
2002 2003 2004 2005 2006
1 Total housing loans outstanding 32,826 46,470 85,346 1,26797 1,82,167
2 Rural housing loans outstanding 3,160 5,387 7,712 13,024 18,213
3 % of rural housing loans to total 9.6% 11.6% 9.0% 10.3% 10.0%
4* No. of dwelling units (rural) 1,87,268 1,78,200 2,43,753 2,58,562 2,98,651
5* Loan Amount disbursed (rural) 3,246 3,816 6,354 6,441 8,368 13
Source: NHB, Media Reports, World Bank Report
HDFC’s Tie-up with KfW / GOI for
Rural Housing Micro-finance
• In the early eighties HDFC had a limited focus on low-income
and informal sector households.
• Attempts were made to finance weaker-section housing projects
on an experimental basis across regions.
• HDFC launched a new product: Home Savings Plan (1988).
• In 1989, HDFC accessed low-cost loan funds from KfW,
Germany with a focus on EWS housing. KfW emphasised on
‘financial sector intervention’ more than housing promotion.
• GOI provided sovereign guarantee to KfW under bilateral co-op.
• HDFC has assisted over 1.05 lac EWS households under 200
schemes by disbursing loan funds of Rs. 150 crore. 14
Lending Methodology:
Intermediation By MFI / NGO
HDFC --- Intermediary Agency --- CBO/ Federation/ SHG --- End Borrower
The NGO-intermediary identifies the borrowing households with genuine need, checks on
their socio-economic profile and furnishes relevant project information
Prepares plans for the construction activity with the participation of borrowers and offers
appropriate technical assistance during construction based on internal capabilities
The loan disbursement from HDFC is split into smaller amounts and on-lent to the individual
borrowers based on stage-wise progress of construction
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Role Of The NGO / MFI...
The owner is made fully responsible with the loan funds – to purchase building materials,
use technology of his choice, and to hire masons and other skilled and unskilled workers
Ensures a minimum self-help contribution from the borrowers as equity into the housing
process, by way of labour, cash, use of salvaged building materials etc.
Monitors the construction work regularly – HDFC carries out a technical review by way of
field visits prior to each disbursement.
Facilitates the repayment of loan from the individual borrowers and makes a consolidated
payment to HDFC; provides HDFC with progress and loan recovery reports.
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Typical Loan Terms -
Gross household income of the borrower
< Rs. 4000/- p.m. – or as per EWS definition
Cost per dwelling unit < Rs. 90,000
Size of the house < 400 sq. ft.
Loan amount not to exceed Rs. 100,000; or 90% of the
cost of the house, whichever is lower
Repayment term: Up to 15 years
Rate of Interest: Fixed or Linked to HDFC’s RPLR
Security: Equitable mortgage of dwelling units financed
and any other security as acceptable
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AGENDA
• Why have PPPs – Relevance in Housing
• HDFC Snapshot
18
Land Policy for Affordable Housing
• Simplifying processes for land acquisition, Reviewing processes of master
planning and treat affordable housing as a ‘public purpose’
• Land related issues i.e. bringing in additional lands, allowing higher FSI /
FAR and in-situ development of slums, all need to be implemented in an
integrated manner
• Formal recognition of ‘security of tenure’ by the Government. Several forms
of providing security can be explored
– Ensure that there is no threat of eviction
– Tenurial security to facilitate access to market funds
• Improve the speed of transactions through cadastrals, computerised land
records and application of e-governance to land transactions
• Need to foster an environment that will make rental housing for EWS/LIG
categories a worthwhile investment
• Set up a Regulator for real estate which has a mandate for affordable housing,
enact model laws in states
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Fiscal and Financial Framework
Funding of Affordable Housing through:
– Allocation of additional budgetary resources (JNNURM)
– Creation of a pool of resources called ‘Shelter Fund’ (0.5% cess on taxes)
– Incentivise HFCs and Banks to encourage investment flows
– Allow HFIs to access long-term External Commercial Borrowings (ECB)
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AGENDA
• Why have PPPs – Relevance in Housing
• HDFC Snapshot
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Upcoming Projects in the Pvt. Sector
• Janadhar Construction Pvt. Ltd. – Attibele, Bangalore
• CSC Constructions at Attibele and Devanahalli, Bangalore
• Provident Housing – a subsidiary of Purvankara Projects
• Santosh Associates – Batwa near Ahmedabad
• Matheran Realty Co. – Tanaji Malasure City, Karjat, Mumbai
• Shapporji Pallonji – New Town Rajarhat, Kolkata
• Tata Housing – Nano Housing Project at Boisar, Mumbai
• Omaxe Ltd. Subsidiary – National Affordable Housing Co.
• DLF and UNITECH have announced their forays
• Micro Housing Finance Corporation, a new HFC at Mumbai
• Aarusha Homes – Dormitory / Hostel Acco. for workers in AP
• Emkay Group, Malaysia – likely to partner with Embassy 23
MFIs/NGOs in Housing Microfinance
• SEWA BANK and Mahila Housing Trust
• SKS Microfinance, Andhra Pradesh
• BASIX / BSFL (Individual Lending)
• RGVN (Individual Lending thru’ NGOs in NER)
• ASA (Grameen Model, Tamil Nadu)
• BWDA (SHG approach, Tamil Nadu)
• DHAN Foundation (SHG Federations, Southern India)
• FREED, GSGSK, WWA, KIDS (Kerala)
• SPARC, Slum Rehabilitation Society, Mumbai
• AVAS, a housing rights NGO at Bangalore
• Janalakshmi Social Services, Bangalore
• IASC, an HDFC promoted MFI
• UJJIVAN, an urban MFI at Bangalore
• MIMO Finance, Uttarakhand
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Prospects and Challenges
• Include low-income housing under Priority Sector lending (loan < 10 lac)
• Promote a credit bureau dedicated for micro-finance clientele.
• Facilitate security enforcement – recovery of EWS housing loans.
• Proposed introduction of a mortgage repository.
• Need to attract private capital and foreign direct investment.
• Access to long-term funding such as pension funds.
• Deepening the secondary mortgage market.
• Access to mortgage insurance.
• Need for a real estate regulator:
– Consumer protection and transparency
– Serve as a single window for overseeing affordable housing agenda
– Promote real estate reforms
• Increased investment in low-cost, eco-friendly construction technologies.
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AGENDA
• Why have PPPs – Relevance in Housing
• HDFC Snapshot
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AN OVERVIEW OF HDFC
• Incorporated in 1977 as the first specialised mortgage company in India
• Objectives:
– Enhance residential housing stock through the provision of housing finance
on a systematic and professional basis and to promote home-ownership;
– Increase the flow of resources for ‘housing’ through an integration of the
housing finance sector with the overall domestic financial markets.
• Now a Financial Conglomerate with interests beyond mortgages:
HDFC
HDFC
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