1. Repco Foundation for Micro Credit www.repcohome.com www.repcofoundation.com REPCO FOUNDATION FOR MICRO CREDIT FORMAL & INFORMAL LINKAGES IN INDIAN HOUSING SECTOR Presentation by G. Manickasundaram Project Director

2. Repco Foundation for Micro Credit www.repcohome.com www.repcofoundation.com GROWTH OF THE INDIAN HOUSING SECTOR – IMPACT  Engine of domestic growth  Backward & forward linkages with over 269 ancillary industries  Second largest employment generator in the country  Growth in demand is driven by improved affordability Lower interest rate Fiscal incentives Stable property prices Rising income levels Increasing housing needs

3. Repco Foundation for Micro Credit www.repcohome.com www.repcofoundation.com Formal Banks Financial Institutions Capital Market Cooperatives NBFCs Informal Non institutional Private sources Money lenders Traders Relatives & Friends NGOs SHGs FORMAL AND INFORMAL LINKAGES

4. Repco Foundation for Micro Credit www.repcohome.com www.repcofoundation.com SOURCES FOR FINANCE FOR HOUSE CONSTRUCTION OwnFriends/ relatives Cooper ative Govt.Private financial Private non- financial Money lenders Construction type New Building 64.89.33.29.01.90.68.8 Addition to floor space 70.07.33.16.50.50.110.1 Maintenanc e / repair 71.08.03.34.40.4 10.1 By structure type Pucca 65.39.23.18.42.00.49.3 Semi pucca 67.38.31.68.00.40.911.3 Kutcha 70.38.20.62.30.20.315.2 (% of monetary cost on construction) Source: NSSO (2004)

5. Repco Foundation for Micro Credit www.repcohome.com www.repcofoundation.com 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. 28-10-2009 5

6. Repco Foundation for Micro Credit www.repcohome.com www.repcofoundation.com Low Income Housing- Repco Experience Areas of concern 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. 28-10-2009 6

7. Repco Foundation for Micro Credit www.repcohome.com www.repcofoundation.com Low Income Housing- Repco Experience… Areas of concern 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 28-10-2009 7

8. Repco Foundation for Micro Credit www.repcohome.com www.repcofoundation.com Areas of concern Reasons 9) Need for revising the legal frame work (eg) Lands with Tribals / allotted to eligible beneficiaries under slum clearance schemes 10) Coordination with Govt. Departments for infrastructure development Roads, Electricity, Water, Schools and Transportation 11) Improving the Quality of income of target group All eligible members of the family to be optimally employed. Low Income Housing- Repco Experience…

9. Repco Foundation for Micro Credit www.repcohome.com www.repcofoundation.com 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.  It is felt that the solution Group Housing Concept through SHG Mode  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. 28-10-2009 9

10. Repco Foundation for Micro Credit www.repcohome.com www.repcofoundation.com 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 28-10-2009 10

11. Repco Foundation for Micro Credit www.repcohome.com www.repcofoundation.com BENEFITS OF THE SCHEME  Provides shelter to the poor downtrodden.  Gives opportunity for the unorganized labourers to own houses.  To benefit Women Self Help Group members to renovate their houses.  Shelter loan improves sustainability and the relationship among their members.

12. Repco Foundation for Micro Credit www.repcohome.com www.repcofoundation.com