Trends in Retail Housing Loans - HFC’s Perspective Presented by: Anil Sachidanand (CEO - DHFL) NHB – CEO’s Meet 17 th March’ /26/2015

NHB – CEO’s Meet 17th March’10 2 AS per vision 2020 “housing for All” 100 million housing units would be required - Demand outcasts Supply High Demand growth driven by: Improved affordability Increasing urbanization Favorable demographics Increasing economic activity Increase in supply of affordable homes Price correction in residential real estate market 10/26/2015 Housing Finance penetration is still low in Tier-2, Tier -3 cities. Need more HFC’s, RRB’s, Banks with focus on housing finance.

Level Playing Field for HFC’s Two fold regulatory structure – On occasions results in duality of rules Convergence on differences with aspect to : –Taxation treatment –Capital adequacy –Liquidity requirements –Deposit insurance –Disclosure requirements NHB – CEO’s Meet 17th March’ /26/2015

Lending Practices Lower Income segment is still “untouchable” by many of the players – Need for bringing in Financial Inclusion More support required for developer financing in affordable housing segment. Lack of standardization in the lending process by various banks & HFC’s Increasing proportion of other loans in HFC’s credit portfolio due to intense competition on yields from banks NHB – CEO’s Meet 17th March’ /26/2015

Rate of Interest Introduction of 8% Home loans bought in interesting dimensions into the Indian Mortgage Finance Market in the recent past Broadening the market base – need for an independent floating rate benchmark NHB – CEO’s Meet 17th March’ /26/2015 Prepayments to be correlated with interest rates We still lack a well developed model to accurately forecast mortgage prepayments Customer’s lingering debt averse attitude play a more crucial role in prepayment patterns Prepayment Charges Other Parameters

Customer Service Emerging as one of the key areas in competition to win over customers HFC’s have been upgrading their technology and investing in sophisticated systems for sourcing and processing and managing information pertaining to home loan customers On the service front the housing finance Company’s have begun addressing concerns of borrowings through counseling and legal advisory services on matters pertaining to property’s title, technical evaluation, pricing etc. As the scope for product differentiation is increasingly getting limited, HFC’s will increasingly compete on the strength of their service quality NHB – CEO’s Meet 17th March’ /26/2015

Together GOI- RBI-NHB-HFC’s need to work towards overcoming the challenges and constraints Lack of Uniformity of norms and variation in standards amongst industry players : Imposes systematic risks, which can be a potential threat Aggressive approach may lead to defaults and downward revision of interest rates - may lead to erosion of profitability in the long run Industry Fragmentation: Major impediment for its growth Conflicting Interests: Both banks & HFC’s competing with each other for the same housing pie but functioning and lending practices seem to bear no similarity ALM: Asset liability mismatch one of the biggest risks confronted by HFC’s Non availability of central registry for housing mortgages NHB – CEO’s Meet 17th March’ /26/2015

What needs to be done? Encourage / initiate small savings which can serve future housing needs thru Banks or HFC’s? Incentivize developers and HFC’s supporting affordable housing Standardize origination intermediaries through licensing etc and strong punitive measures for fraudulent intermediaries Start to implement Electronic format for property registrations across the country Develop products for seasonal income earners and aligning them with standard NPA norms Need for a mortgage guarantee company FDI Constraints: ECB / FDI Route to be opened for HFC’s Development of capital market by promoting securitization in India NHB – CEO’s Meet 17th March’ /26/2015

DHFL: Way forward Way ahead: Continued focus on LMI segment Increase penetration in tier-2 and tier-3 locations through Public Private Partnerships Supporting affordable housing initiatives. Providing technical and marketing advisory solutions to small size developers NHB – CEO’s Meet 17th March’ /26/2015 A leading player with over 25 years of expertise in the LMI segment of the Housing Finance Industry Consolidated loan book stands at Rs billion (Dec’09) with an average ticket size of apprx. Rs.5 lac Pan – India captive distribution network covering 194 locations