NHB

Housing Microfinance:
NHB’s Initiatives

P.R.Jaishankar
Assistant General Manager
National Housing Bank

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 PRESENTATION STRUCTURE
NHB

◊ Housing: An Agent for Financial Inclusion

◊ Housing and Housing Finance

◊ Housing Micro Finance: Role of NHB

◊ Housing Micro Finance: NHB’s Experience

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 HOUSING: AN AGENT FOR FINANCIAL INCLUSION
NHB

◊ Housing has direct impact on employment and

income generation - An engine for Equitable and
Balanced Economic Growth.
◊ Impact in terms of Improved habitat, Living,
Educational, Social and Cultural standards leading to
Human Capital Formation and thereby the future
Income capabilities
◊ Improved productivity leads to enhanced Income,
Savings and Repayment potential on sustainable lines
◊ Sustainable Human Settlement: An Effective tool
towards “Financial Inclusion” with Financial
Stability and Social Inclusion
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HOUSING DEMOGRAPHICS
NHB
 HOUSING SHORTAGE
NHB

• Housing Shortage estimate at the end of the 10th

Plan:
– 24.7 million for 67.4 million households
– Expected to increase to 26.53 million units for 75.01
million households by end of 11th Plan period
– 99% of the shortage exists in EWS / LIG segments

• Pressure on Urban Services due to Migrating populace.

• Still vast non-formal segments remain un-served.

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 HOUSING & FUND REQUIREMENT 2007-12
NHB
Particulars Housing Requirements (2007-12) Funds Requirements (2007-12)
(in million units) (in ‘000 crores)

R U T R U T

Additional Houses 32 16 48 344 645 989

Of which
EWS including BPL, MAPL 14 7 22 36 74 110
Upgradation of Existing Pucca/ 23 9 32 35 24 59
Semi Pucca/ Katcha Houses

Total (Additional Houses + 55 25 80 379 669 1048

Upgradation / Repairs etc.)

• 48 million additional houses are required during Eleventh Plan Period

2007-12;

• There is need for diverse sources of finance and diverse financial

instruments
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 Institutional Finance –
Emphasis on loans above Rs.5 lakhs NHB
CAGR on Housing Loans of SCBs for 2000-06
140 CAGR No. of Accounts - 12.3%

105.33
103.76
102.96
120
CAGR O/s Housing Loan - 28%

81.76
81.93
81.56
100
80
CAGR(%)

42.38
60
41.44  Housing Finance Market is
40.74

40
“Value Driven rather then Volume Driven”
14.33

13.72

20
-10.09

2.49
-6.15
-6.19

0
upto 0.25 L >0.25 L to 2 L > 2 L to 5 L > 5 L to 10 L > 10 L to 25 L
-20
Loan slabs (Rs. in Lakhs)
 Increased emphasis on loan categories
Accounts Credit Limit Outstanding Loan above Rs. 5 Lakhs – Trend Continuing
CAGR on Housing Loans of HFCs (2002-06)
60
52
 Increased emphasis in lending
50 in Metropolitan areas
40
 Rural Housing Finance stagnant at 10%
CAGR(%)

30
22
20 (Source: BSR Reports, RBI)
7 6
10

0  Need to develop New Financial Architecture

-10
upto
-1.71 L >1 L to 3 L > 3 L to 5 L > 5 L to 10 L > 10 L for Affordable Housing
Loan Slabs (Rs. in Lakhs)
Source: BSR, RBI & T&P, NHB Reports
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 AFFORDABLE HOUSING NHB
• Housing is the combined matrix of following elements:
– Land Supply and Management; Land Use Optimization;
– Infrastructure – On-site and Off-site;
– Building Technology, Materials and Labour;
– Finance;
• Equity/Capital and Borrowing
• Liquidity
– Profit Component;
• Affordability:
– A Relative Term
– Depends on Income/Capacity to ‘afford’ the above elements.
• Target Segment Affordability (Deepak Parekh Report):
– Price: 4 times Gross Annual Household Income, AND
– Carpet Area: upto 600 sft, AND
– Rent: Upto 30% of Monthly Household Income
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 MICROFINANCE: TOOL FOR POVERTY ALLEVIATION
NHB

• Emergence of Microfinance to enable institutional credit

flow to the poor and replace informal credit sources
• Microfinance: "The provision of thrift, credit and other
financial services and products of very small amounts to the
poor in rural, semi-urban and urban areas for enabling them
to raise their income levels and improve their living
standards”
• Enhance the poor households to
– Increase income
– Building assets
– Empowerment
– Active partners in development process
• Reduce their vulnerability in times of economic stress 9
 Microfinance Sector NHB
• Client Base: 22.6 million (2009)
• 13.2 million Rural; 9.4 million Urban
• YoY Growth 60%
• Total Outstanding Microfinance Loans: Rs.35,939 crore (09)
• Loan Portfolio of MFIs: Rs.11,730 crore (09)
• At current levels Microfinance constitutes 1.29% of Gross Bank
Credit of Scheduled Commercial Banks
• Average Loan Size: Rs.5400/- (4200/- in 2008)
• 38% of clients with average loan size over Rs.10,000/-
• Constitution:
• Non Banking Finance Companies
• Not for Profit MFIs (Sec 25 Co.s, Public Trusts, Societies)
• Mutually Aided Cooperative Societies
• Market Shares: 34 NBFCs – 76% of overall MF Portfolio; 133
Societies -10%
• Penetration: Greater in Southern Region
• 54% of Clients ; 58% of loans 10

Source: Micorofinance India: State of Sector Report 2009

 MICRO FINANCE INSTITUTIONS:
EFFECTIVE DELIVERY CHANNELS NHB

• Timely and adequate credit and other financial

services to the poor at their doorstep - an edge
• Credit histories of the poor borrowers
• Good systems and procedures for giving and
collecting loans.
• Most of the MFIs have maintained recovery
rates in excess of 95%.
• Very few MFIs have ventured into providing
housing loans to the poor.

• Need to tap the potential of MFIs which can

provide housing loans to the poor.
 NHB’s STRATEGY FOR FINANCIAL INCLUSION
NHB

CUSTOMIZED FINANCIAL PRODUCT INTERVENTION:

• RURAL HOUSING:
◊ Supplementing Government Schemes
◊ Productive Housing in Rural Areas
◊ Financing SHGs - Partnership Approach - NGOs/MFIs/Sec.25
◊ Rural Housing Development Fund

• URBAN HOUSING:
◊ Supplementing Govt. Schemes e.g. JNNURM
◊ Financing SHGs – Partnership Approach - NGOs/MFIs/Sec.25
◊ Slum Redevelopment and Up-gradation
◊ Integrated Township Development Projects (PPP projects)
 HOUSING MICROFINANCE: NHB’s ROLE
NHB

• Focus – Un-served and Under-served

• Housing Micro Finance (HMF)
• Integrated Habitat Approach
• Productive, Income Generating Housing
• Savings-induced Housing
• Incremental Housing
• Water and Sanitation,
• Women oriented
• Partnership approach –
–MFIs, Community Based Institutions
–Finance, Co-finance,
–Capacity building,
–Portfolio Securitization,
–Equity support to Rural HFCs 13
 NHB’s HMF – KEY FEATURES
NHB
Amount of Generally 2 to 7 times larger than average micro-credit loans
Loan
Loan Term 2 - 5 years for improvement and up to 10 years for fresh
construction
Delivery • Housing Micro Finance Institutions
Channel • Non Government Organizations
Framework • Societies registered under Societies Registration Act,
1860
• Section 25 Companies
• Any other institution approved by Govt. / RBI for purposes
of undertaking microfinance
Security / • Hypothecation of Book debts
Collateral • Agreement to mortgage
• Group guarantee of SHGs
• Other forms of security like FDRs, etc.
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Wherever title deeds are available, they are mortgaged.
 HMF – KEY FEATURES
NHB

Selection of Poor people (in Urban and Rural areas) with means of
borrowers repayment like artisans, craftsmen and people in the
informal sector. Should have completed atleast 3 loan
cycles successfully with MFI.
Co-Financing A productive loan may also be extended by MFIs (as co-
MFIs finance) to enhance repayment capacity.

Other Salient • MFI Borrowers to on-lend to SHGs.

Terms • Track record for with MFI borrower.
• Members of SHGs to have successfully completed
atleast three loan cycles.

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 HMF: RISKS AND MITIGANTS
NHB
Risks:
• Affordability of Borrowers
• Viability of MFIs
• Limited access to medium and long term funds
• Insecure land tenure
• Requirement of high element of savings
• Difficulty in obtaining Group Guarantee
Mitigants:
• Proper selection of clients – Seasoned clients
• Flexible funding mechanisms
• Insistence on Standard Corporate Governance of MFIs
• Need for co-ordination between formal credit institutions to
mitigate geographical concentration risks
• Capacity building – Training, Research and Development
• Use of information technology & Micro insurance
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 SIGNIFICANCE OF HMF NHB

• Creation of Assets
• Enhanced Social Security
• Increased Productivity
• Increased Bargaining Capacity
• Increased Volume of Business
• Saving in Recurring Expenses
• Providing Sustainable Employment
• Women Empowerment
 NHB’s INITIATIVE
NHB

• NHB has experience in HMF on pan India basis.

• Leading Micro Finance institutions across the country
are partnering with NHB for rolling out HMF
programmes for their members.
• Financial support is provided on self sustainable lines.
• Composite loan products are being promoted to
improve the viability of the programme by helping in
increasing income of beneficiary.
• Separate Water and Sanitation component in the
housing has been included to improve penetration of
sanitation facilities.
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 NHB’s Partnership with UN Habitat
NHB

• NHB and UN Habitat have signed Agreement of

Cooperation for collaborating in the field of water and
sanitation in India.
• Delivery of credit to targeted segments at relatively
low interest rates for water and sanitation facilities is
envisaged through the Micro Finance Institutions and
Urban local Bodies.
• Typical HMF loan under this programme to have two
parts
 Housing loan for construction / repairs /
upgradation / incremental housing (at competitive
rates) - with NHB funds
 Loan for water and sanitation facilities (at
subsidized rates) - with UN Habitat support 19
 NHB’s FINANCIAL ASSISTANCE TO HMF
NHB

(Rs. in Crore) Sanctions Disbursements Houses

Rural 33.55 17.80 6289
Urban 48.12 11.88 9318
Total 81.67 29.68 15607 Madurai, TN

Mumbai, Maha

Warangal, AP

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 NHB’s HMF – STATE-WISE
NHB

S.No State Sanction Disbursements Houses

1 Andhra Pradesh 24.55 8.07 2801

2 Assam 0.30 100

3 Gujarat 10.00 0.30 1300

4 Karnataka 14.00 10.89 2475

5 Maharashtra 5.82 3.16 147

6 Orissa 7.00 4.50 1085

7 Tamil Nadu 19.00 2.26 7576

8 Kerala 1.00 223

Total 81.67 29.68 15607

(Rs. in Crore)
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SHG housing at Tirupati, Andhra Pradesh
NHB

A house before sanction of NHB loan

A house after construction aided by

NHB loan

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Slum Rehabilitation Project, Mumbai
NHB

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 Tamil Nadu
NHB

A house constructed in Madurai A house constructed in Sivaganga

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 Tamil Nadu
NHB

House in Pudukottai House in Sivaganga

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 Andhra Pradesh NHB

House constructed in Warangal (AP) House Constructed in Hanamkonda (AP)

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 A Few Toilet Designs
NHB

Toilet designs under implementation by one of the

MFI partners of NHB
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 HOUSING (MICRO)FINANCE: IN SUM
NHB

• Vast untapped market – Urban and Rural

• Market based inclusive finance feasible, and
• Requires range of:
– Customized financing products,
– Risk mitigants,
– Securitization
– Viability gap funding (in certain segments),
– Specialized Delivery systems,
– Dedicated Financial intermediaries,
– Capacity building
• An entirely Specialized financial architecture for
Housing Microfinance
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 THE WAY FORWARD
NHB

NHB’s MARKET DEVELOPMENT ENDEAVOURS TOWARDS

CREATION OF APPROPRIATE FINANCIAL ARCHITECTURE
•Risk Mitigation
◊Mortgage Credit Guarantee
◊Title Indemnity
◊Credit Guarantee Fund
•Securitization: Creation of Secondary Mortgage Market
◊Liquidity and Credit Enhancement
•Other Measures
◊Capacity building – Training, Research and Development
◊A Specialized HMF Corporation
◊Equity Support
◊Facilitating Regulations
 NHB

Thank You
Visit us at : www.nhb.org.in
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