Role & Initiatives of Housing Finance Companies for promoting Affordable Housing. Presentation By: GRUH Finance Limited

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1 Role & Initiatives of Housing Finance Companies for promoting Affordable Housing Presentation By: GRUH Finance Limited 15 th November 2014 at Capex Seminar, G nagar

2 GRUH - Snapshot GRUH is Recognized by National Housing Bank for its refinance facility Gujarat government had given Rs. 2 crore soft loan to GRUH for starting operations in Commenced operations in 1988 from Ahmedabad Gujarat. Retail network of 150 offices across 7 states of the country. GRUH is having customers in 214 talukas out of total 224 talukas of Gujarat, penetration of 96%. Gujarat contributes 35% of GRUH s total disbursement.

3 Urbanization Facts India s rate of urbanization was last recorded at 31.1%, much lower than China, Indonesia, Brazil etc., which leaves significant headroom for rapid migration in future. Urban India is expected to house 600 million people by 2031, an increase of 59% from India s urban housing shortage is around 19 million Slum population in 2011 was 66 million; projected to be 105 million by Indian cities are deficient in basic amenities such as clean drinking water, sanitation and lighting facilities. Source: Census data 2011, Planning Commission, World Bank

4 Urbanization -its impact on housing One of the biggest pitfalls of unplanned urbanization is shortage of housing units. According to MHUPA in 2012, shortage of housing units in India was million; nearly 95% of shortfall was in EWS/LIG segment Demand for urban housing will scale up by nearly 12 million by 2017 based on current growth of population. Total Housing shortage Projection Housing Shortage Unit s in million Urban shortage in Rural shortage in Additional demand due to population growth in Total Demand Source: Cushman & Wakefield Research, NHB, MHUPA

5 Why Affordable housing has not worked in India so far Land cost in urban centres are high; often constituting more than 50% of the project cost. Peripheral areas of city where land prices are low lack infrastructure facilities Process of acquiring necessary approval for project takes between 18 to 24 months, which adds additional cost for developers Individuals in EWS/LIG segment often do not have formal income proof. Very few housing finance companies provide finance to individuals not having formal income proof.

6 Measures initiated by Government/ NHB JNNURM scheme National Urban Housing Policy Proposes Mandatory earmarking of land or FSI for EWS/LIG segment RBI has opened up ECB window for Developers and lenders to bring low cost funds for affordable projects NHB refinance schemes for loans upto Rs.10 lacs for EWS and LIG segment in urban area Setting up of Credit Mortgage Guarantee Fund of Rs.1000 crore to provide risk guarantee for loan defaults under loans upto Rs. 8 lacs for beneficiaries whose monthly income is less than Rs. 16,667/-

7 Role played by GRUH Finance in addressing housing shortage First HFC to offer Home Loans in Rural Areas First HFC to offer Home Loans to Self Employed not having formal income proof. Disbursed loans to more than 2.70 lac families aggregating to Rs.13,500 crore Contributed in creation of Housing Stock of Rs.16,900 crore Loans Outstanding more than Rs.7900 crore Incremental Average Loan of Rs lac

8 Initiatives taken by GRUH Finance First HFC to develop model for credit appraisal of applicants not having formal income proof. First HFC to develop risk based pricing model for home loans based on 22 credit parameters, which is validated by CRISIL. Risk based pricing has enabled GRUH to extend loans to lowest stratum of society including house maid, rickshaw driver, vegetable vendor, pani puri vendor, cobbler etc. by evaluating risk of each case. Risk based pricing has also helped in keeping recovery in control and Gross NPA of 0.27% is one of the lowest in industry.

9 Calculation of loan eligibility for various segment of customers. Segment Estimated EMI payable EMI Loan Property Times Monthly Income Ratio (%) Amount (Rs.) Eligibility Cost Monthl y (Rs.) (Rs. In lac) (Rs. In lac) Income House Maid 5,000 35% ,98, Rickshaw driver 6,000 35% ,38, Car driver 9,000 35% ,57, Office clerk 12,000 35% ,76, Graduate 15,000 40% ,81, Post Graduate 20,000 40% ,07, Loan eligibility considered for 25 year 11.00% ROI

10 Examples of loan cases done by GRUH (in Affordable housing segment) Vegetable Vendor Live Case Loan amount: Rs.3.50 lacs Tenure : 20 years Location : Bavla Value of property: Rs lacs Area: 675 sq.ft Total Family members: 4 Business timing: 8am to 8pm Monthly Income: Rs Daily sale: Rs to 1700 Margin : 25% to 30% EMI: Rs.3733

11 Live Case - School-Van Owner School-van Owner Loan amount: Rs.3.20 lacs Tenure: 10 years Location : Ahmedabad Value of property: Rs lacs Area: 414 sq.ft Total Family members: 2 Business timing: 7 am to 2 pm Monthly Income: Rs. 14,000 Total students: 40 Monthly charges : Rs. 500 to 600 Expenses : Rs to 6000 p.m EMI: Rs.4536 Business photo Property phto

12 Live Case - Tea Vendor Tea-stall owner Loan amount: Rs.3.50 lacs Tenure: 10 years Location : Junagadh Value of property: Rs lacs Area: 355 sq.ft Total Family members: 5 Monthly Income: Rs. 20,000 Daily sale: Rs. 1800to 2000 Margin : 30% to 40% EMI: Rs.4921 Business photo Property photo

13 Live Case - Paani-Puri Vendor Paani-puri vendor Loan amount: Rs.3.25 lacs Tenure: 15 years Location : Bhuj Value of property: Rs lacs Area: 679 sq.ft Total Family members: 3 Monthly Income: Rs. 11,500 Daily sale: Rs. 1200to 1500 Margin : 30% to 35% EMI: Rs.3932

14 Live Case Coconut Vendor Coconut vendor Loan amount: Rs.8.50 lacs Tenure: 15 years Location : Porbandar Value of property: Rs lacs Area: 784 sq.ft Total Family members: 4 Monthly Income: Rs. 20,000 Daily sale: Rs to 1800 Margin : 40% to 45% EMI: Rs.10477

15 Live Case Dhobi / Drycleaner Dhobi/ Drycleaner Loan amount: Rs.6.00 lacs Tenure: 25 years Location : Vadodara Value of property: Rs.8.00 lacs Area: 716 sq.ft Total Family members: 4 Monthly Income: Rs. 21,000 Daily sale: Rs to 1800 Margin : 40% to 45% EMI: Rs.6712

16 Performance in informal segment (Individuals not having formal income proof) Assisted 1.42 lac customers who have monthly income of less than Rs.15,000 53% of home loan customers Financed more than 47,900 properties having built up area less than 40 sq. mts. (EWS segment) Financed more than 85,000 properties having built up area between 40 sq. mts. to 60 sq. mts. (LIG segment)

17 Performance in Government sponsored schemes GRUH is empanelled with all government agencies of Gujarat like AMC, GHB, SUDA, RUDA, RMC for providing home loans to beneficiaries in EWS/LIG/MIG segment. GRUH is also participating in affordable housing projects of Chhattisgarh, Rajasthan and Karnataka Cases disbursed Cases under process Ahmedabad Municipal Corporation (AMC) Gujarat housing board (GHB) Rajkot Municipal Corp(RMC) 0 85 Rajkot Urban Development Authority Note: Above data is only of cases done under Mukhymantri Awas Yojna

18 Difficulties faced by beneficiaries / GRUH Many beneficiaries have not received Allotment letter from GHB and AMC. Margin money receipts is not issued by AMC and GHB, but issued by collecting banks. GRUH is not included in approved list of lenders for advancing loans to government employees in Porbandar evenafter number of follow-ups.

19 Affordable housing An opportunity Assuming the present shortage of 20 million dwelling units and average cost of Rs. 5 lac per unit then investment of Rs. 10 lac crore is required. According to an estimation by KPMG, demand for Affordable Housing in EWS, LIG and MIG represents a market worth Rs. 7.5 trillion Hence Government and Private Sector must work together and carefully plan with responsibility and reduce housing shortage.

20 We have a heart to serve the poor... We seek blessings of EWS/LIG customers by making them proud owner of their first home by GRUH s loan.. Thank you

CREDIT RISK GUARANTEE FUND SCHEME FOR LOW INCOME HOUSING

CREDIT RISK GUARANTEE FUND SCHEME FOR LOW INCOME HOUSING BACKGROUND With the background that a) GoI decided to start a new scheme Rajiv Awas Yojana (RAY) in order to create Slum-Free India and b) EWS/LIG