1. R. V. Verma National Housing Bank India
Affordable Housing Development Summit India
Low Income Housing
R. V. Verma
National Housing Bank
India

2. Trends in Housing Finance
Housing Loans outstanding 7.9% of GDP
Supportive Regulatory/Fiscal Policies
Financial Deepening
Supply Responses: Demand Driven
Main beneficiaries - salaried class, professionals and tax payers
Challenge for Low Income Housing – “Accessibility” and “Affordability”

3. Housing Finance Market
Financial
Market
HFCs
Banks
MFIs
Fiscal and Credit Policy Support
Capital
Market
Financial Sector
Informal
Sector
Affordability
Real Sector
Housing
Market
Land
&
Construction
Infrastructure
Public
Agencies
Private
Developers 3 3

4. Housing Loan Outstanding (Rs./billion)

5. Issues in Low Income Housing
Rapid growth in housing sector has bypassed Low- Income Households
Demand Identification
Risk Perception
Price Rise, Interest Rates - Impact on Low Income Housing
Market/Subsidy based Approach

6. Issues in Financing Limited access to housing credits
Cannot contract debts on terms of the financial market
Unstable income and unstable cash flows
High risk & high cost - to - service customers
Role of Guarantee/Risk Fund
Role of Government & Financing Institutions in Market Environment
Leveraging effect of Subsidy

7. Supply Constraints Competing Demand on Land and Finance
Land supply is constrained:
Land availability
Land use rules
Efficient use of Land
Title and Tenure
Finance Flow Constrained
Stability
Growth
Risk Perception
Need for ‘Integrated Approach’

8. Subsidized Housing Credit Subsidized House Prices
Affordability Issues
Real Sector
Land Supply
Cost of Land
Land market functioning
Infrastructure provision
Construction & Delivery
Role of Public & Private Sector
Financial Sector
Project Finance
Individual Loans
Supply of Funds
Cost of Funds
Whether market based solution?
Role of Subsidies
Subsidized Housing Credit
Subsidized House Prices

9. Ensuring access to housing with infrastructure
In Other Words
Supply Side
Land Acquisition
Infrastructure Provision
Sale of Land
Housing Construction
Housing Sale
Role of Public Agencies/ Developers
Credit Delivery
Demand Side
Purchase Price
Income Level
Affordability
Loan eligibility
Subsidy component
Risk Mitigation
Demand Aggregation
Ensuring access to housing with infrastructure
at affordable prices

10. Challenges Market’s limitations / Subsidy Limitation
Private Capital and Public Objective
Formal & informal sectors compartmentalized
Demand aggregation, demand registration, intermediation and risk mitigation
Policy Reforms

11. Where is the Disconnect?
Not enough supply at lower prices. Impact of lowering prices on the stock of housing, the flow of housing and housing finance
Price – Supply relationship. Profit on Value or Volume. Price/cost structure
Demand sensitive to price but supply not forthcoming

12. Where is the Disconnect?
Builders see lower profits and weak market
Financiers’ see higher risk in Low Income individual lendings despite high demand
Measures to convert the investor’s market into consumer’s market
Can this be bridged through fiscal intervention and Risk Mitigation!

13. India LIH Sector Profile – Wide Stakeholding
Real
Sector
Central
Government
Financial
Sector
Policy
&
Programmes
Policy
&
Programmes
PUBLIC
PRIVATE
Partnership
Instns &
Products
Facilitator
&
Enabler
State/Local
Governments
Financial
Institutions
Formal
Sector
Informal
Sector
Affordable Housing for All and Financial Inclusion
–Mutually Consistent Themes

14. Summing Up … No Broad-brush Approach Need for Segmented Intervention
Role of State Governments & Public Agencies
Supportive Fiscal & Credit Policy
Market/Subsidy based Approach
Developing innovative products and institutional mechanism

15. … Summing Up Identify land for construction
Liberalize construction finance for low income housing
Project approach and economies of scale
Price determination – a critical consideration
Develop mechanism for Demand Registration
Tap Savings potential – building borrowers’ equity
Actively involve supply side agencies, private and public

16. Conclusion …
De-risk the segment through suitable risk mitigants both in the financial segment and the real sector segment (demand and supply side)
Develop a role for the government in low income housing, consistent with the market orientation of the rest of the segments (without conflicting)
Develop policies so that housing is able to compete fairly with other sectors for funds

17. INCLUSIVE GROWTH WITH STABILITY
… Conclusion
Affordable House Price
Affordable Credit
State Govt./Municipal Bodies to provide land and infrastructure
Public/Private builders to construct
Pricing & Credit critical
Credit Risk Mitigation
Credit Guarantee Fund
INCLUSIVE GROWTH WITH STABILITY

18. Thank You