Repco Home Finance Ltd LOW INCOME HOUSING FINANCE - the REPCO Experience Presentation by M Balasubramanian, Managing Director, Repco Home Finance Limited

Repco Home Finance Ltd THE REPCO GROUP Headed by Repco Bank- a multi-state Cooperative Sector Institution co-promoted by GOI and Southern States of Tamil Nadu, Andhra Pradesh, Karnataka & Kerala. Head quartered in Chennai, it started operation in 1969 with the main objective of rehabilitating repatriates. The Bank is governed by the Ministry of Home Affairs, Govt. of India. Repco Home Finance Limited (RHFL), a housing finance subsidiary of Repco Bank started its operation in May 2000 and currently having a housing loan portfolio of Rs.1200 crore with 35 branches across Southern India. Repco Foundation for Micro credit (RFMC), an NGO promoted by Repco Bank was registered, under Companies Act 1956 (Section 25). It is a not for profit entity for extending supporting services to SHGs financed by the bank solely with a view to increasing the income level and eventually improving the standard of life of the target group. Repco Infrastructure Development Company Limited (RIDCL), subsidiary of Repco Bank & RHFL came into being in July 2008 with the main objective of implementing PPP projects with Southern State Governments

Repco Home Finance Ltd Low Income Housing- Repco Experience Problem Areas Identified Reasons 1) Non–Availability of Property title Many own possession rights but not ownerships. 2) Non–Availability of Income proof Unorganized laborers, seasonal nature of income. Applicants working in their own farm. 3) Non–Availability of House estimates / expenditure budget Civil Engineers / Contractors are present rarely

Repco Home Finance Ltd Low Income Housing- Repco Experience… Problem Areas Identified Reasons 4) Repayment Schedule generation With seasonal nature of income and non-regularity, projecting continuous income stream is difficult 5) Delay in House Construction Unavailability of Building materials like bricks. 6) Minimum margin contribution There is initial delay in contributing the margin. 7) Abandoning of House Construction in the middle As it is not an income generating activity in most of the cases, they abandon it mid-way 8) High cost of Administration Low ticket size and more frequent need of interaction owing to lack of awareness

Repco Home Finance Ltd Low Income Housing- Proposed REPCO Model Based on our experience so far in dealing with housing for low income, unorganized sector households, the most striking revelation is that owing to traditionally non-income generating nature of investment for housing (for this strata particularly where rental/ speculation is not relevant) there is lack of motivation on part of the beneficiaries. Group Housing Concept through SHG Mode It is felt that the solution to the problems as identified so far lies in promoting a Group Housing Concept through SHG Mode. Hence, REPCO evolved an integrated model for shelter cum income generation for these households through the parent Bank and its 3 subsidiaries-RHFL, RFMC & RIDCL. The core principle of the model would be somewhat similar to NHB’s PHIRA Scheme with executing agencies taking bigger and more active role in implementation. With group guarantee, even without adequate collateral, mortgage could be created and repayment guaranteed thereby addressing the problems of non-availability of property title and income proof

Repco Home Finance Ltd Low Income Housing- Proposed REPCO Model Working of the Model Organizing SHGs involved in similar activity  Promoting SHGs  Vocational Training  Marketing of SHG Products  Income could be assessed based on the prevailing market rates of SHG products and sales volume  There would also be credit linkages.  Follow up and recovery at lower cost ActivityRoleEffectiveness Construction of Shelter cum work shed  Assessing the shelter area requirement and work area requirement  Providing technical support  Planning the layout  Construction & delivery Preparing estimates / expenditure budget, avoiding delay in construction or abandoning construction, providing technology support, low cost housing Financial Assistance  Providing funding  Arranging for refinancing from concerned institutions Taking care of initial margin requirement through family labour and locally available materials of beneficiary

Repco Home Finance Ltd Effectiveness of Proposed REPCO Model Success of this REPCO model is more guaranteed because of the integrated approach and with all the concerned institutions belonging to same group the mutual stake holding as well as cooperation would be much higher. Owning to the integrated approach, overall monitoring would be better resulting in much lesser rate of default & delinquency. Utilizing its partnerships with State Governments through PPP Projects, REPCO is making attempts to obtain land at concessional rate. We are already in talk with Tamilnadu State Govt. for implementation of PPP Projects for housing to industrial workers in the vicinity of Chennai. With REPCO’s proven track record and goodwill, assistance (funding and otherwise) is expected to come in from all-India FIs in related fields and other institutions /agencies

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