Professional Documents
Culture Documents
Regional Presentation by
Council of ICAI R. V. Verma
Executive Director
National Housing Bank
Overview of
Housing
Sector
NHB
Slide 3
Northern India
Regional … Real Estate and Housing
Council of ICAI
• In India, about three fourth (3/4) of real estate development
is for residential use and balance one fourth (1/4) is
predominantly for commercial use.
• Indian Real Estate and Housing Industry
– is growing annually at around 30 per cent.
Overview of – has significant backward and forward linkages with
Housing over 250 ancillary industries.
Sector – is the second largest employment generator, next to
agriculture.
– can create a significant impact on our economic growth,
over the medium term.
– can play a prominent role in the healthy development of
our Nation.
• From every Rupee spent on construction, an estimated 75 –
NHB 80 paise is added to GDP.
Slide 4
Northern India
Regional National Housing Bank (NHB)
Council of ICAI
• Multi-Functional, Development Finance Institution in
Housing Sector, wholly owned by the Reserve Bank of
India
– Promotion & Development
– Regulation & Supervision
– Financing
Overview of
• NHB’s Approach
Housing
Sector – Integrated: Aimed at confidence-building among
Savers, Borrowers, Lenders and Investors.
– Multi-pronged: Simultaneous intervention on both the
demand (financial) and supply (real) side of the housing
sector
– Multi-Agency: Wide coverage of schemes to include
various actors in the field of housing credit delivery,
spread over a vast geographical area in order to achieve
“extensive” outreach
NHB
Slide 5
Northern India
Regional Housing Finance System in India
Council of ICAI
Households, Corporations, Trusts, Provident Funds
Overview of
Schedul
Housing State LIC/
ed
GIC/
Sector Governments
UTI Banks
HUDCO Housing
Public Agencies/ Finance
Primary CHFS SHGs/MFIs Cos.
( in million )
35
31.1
30
Rural Urban Total
23.3 24.0
25 22.9
Overview of
Housing 20
Sector 14.6
16.3
14.7
15 11.6
10 8.2
7.0 7.1
5 3.0
0
1971 1981 1991 2001
NHB
Slide 7
Northern India
Regional Industry Performance
Council of ICAI
600
500
400
Overview of
T otal HFC s B anks C ooper ati ves
Housing
Sector 300
200
100
0
NHB year
1998-99 1999-2000 2000-01 2001-02 2002-03 2003-04
Slide 8
Northern India
Regional Housing Finance – Trends …
Council of ICAI
• Housing
– is a basic necessity, for an individual
– supports economic activities, for a family / community
– is a catalyst, for creating multiplier effect in other sectors
– is a labour intensive activity, for increasing the per
Overview of capita income
Housing – is an engine of growth, for the national economy
Sector
• Housing Finance
– Strengthens the Financial System – Leads to
Investment Demand
– Increases the Assets Formation – Leads to Formation of
Household Physical Assets
– Serves the Social Cause – Key to Development of
Human Settlement
NHB
Slide 9
Northern India
Regional … Housing Finance - Trends
Council of ICAI
• Liquidity in the System
Overview of
• Housing Loan has the Lowest Non Performing Assets (NPAs)
Housing (as at the end of March, 2004) (RBI)
Sector Retail Portfolio of Housing Consumer Credit Card Other TOTAL TOTAL
Banks Loan Durables Receivables Personal Retail Loans &
Loans Loans Advances
Net NPAs
as % of outstanding loans 1.4 4.0 2.4 1.6 1.6 2.8
19.00
20.00%
17.00
18.00%
16.00
15.50
15.50
15.00
Overview of 16.00%
Housing
12.50
13.00
14.00%
Sector
11.25
12.00%
10.00
10.00%
8.50
8.75
8.00%
6.00%
95
97
98
99
00
03
04
4
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Ja
Ja
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Months
NHB
Slide 12
Northern India
Regional Policy Development
Council of ICAI
• Changing Profile of Housing Sector
Slide 14
Northern India
Regional Fiscal Regime for Housing
Council of ICAI
• Individuals:
– Interest on capital borrowed for purchase/ construction of a
house property allowable as deduction upto Rs. 1.50 lakh
subject to certain conditions [Section 24(b) of IT Act]
– Deduction u/s 80 C of IT Act for repayment of Principal
amount of housing loans available from AY 2006-07 onwards
Overview of upto Rs. 1 lakh
Housing – Tax Rebate u/s 88 of IT Act available upto 2005-06 in respect of
Sector repayment of housing loan upto Rs. 20,000/- discontinued
• Corporates:
– Deduction available not exceeding 40% of the profits derived
from the business of providing LT finance carried to special
reserve account [Section 36(1)(viii) of IT Act]
• Investors:
– U/s 54EC of IT Act, Capital gain on transfer of a LT capital asset
by an assessee will not be charged if the same is invested in
NHB bonds issued by NHB, NABARD, NHAI, REC or SIDBI
Slide 15
Northern India
Regional Supportive Credit & Regulatory Policy of RBI
Council of ICAI
• Risk weight on housing loans reduced from 100% to
50% (raised to 75% in September 2004 by RBI in the
mid-term review of credit policy)
• Priority Sector lending includes individual housing
loans upto Rs.15 lakh (raised from Rs.10 lakh )
Overview of • Banks’ indirect lending to HFCs can also be covered
Housing under priority sector
Sector
• At least 3% of incremental deposits of the Banks to be
lent for housing – directed credit
• Low NPA levels in housing sector has encouraged the
lending agencies
• Supportive regulatory policy has led to sustained
increase in lending for housing finance
NHB
Slide 16
Northern India
Regional About National Housing Bank (NHB)
Council of ICAI
• Established in 1988 by an Act of the Parliament
• Preamble of the National Housing Bank Act, 1987
“An Act to establish a bank to be known as the National Housing Bank
to operate as a principal agency to promote housing finance institutions
both at local and regional levels and to provide financial and other
support to such institutions and for matters connected therewith or
incidental thereto.”
• Equity fully held by the Reserve Bank of India
Overview of • An apex institution for housing finance system in India
Housing • Functions
Sector – Promotion & Development of Housing Finance System
• Co-ordination with the Government
• Participation in the equity of HFCs
• Training Programmes /Workshops
• Promotion of RMBS Issues
• Research in Housing & Habitat related areas
– Regulation & Supervision
– Refinance to Primary Lending Institutions
– Project Finance to Public Agencies / SHGs / MFIs
NHB
Slide 17
Northern India
Regional Financing Agencies …
Council of ICAI
• Large number of institutions in the market – supportive
policy framework
• Besides the HFCs, Commercial Banks have emerged as
major players – Public Sector Banks, Private Sector Banks as
well as Foreign Banks
• Commercial Banks currently accounting for 50% of the
market, which is set to further increase
Overview of • Housing sector has registered an annual growth rate of
Housing nearly 32% over the last decade
Sector • Steady growth in number of HFCs – 45 registered HFCs
with NHB and 10 HFCs with assets size more than INR 500
crore
• Dominated by few major players viz. HDFC, LIC Housing
Finance Ltd., CanFin Homes Ltd., Dewan Housing Finance
Corporation Ltd., and HUDCO
• Top 5 HFCs account for nearly 80% of all deposits held by
HFCs and 75% of all lendings done by HFCs
• State level cooperative sector institution – Funding from
insurance company – LIC
NHB
Slide 18
Northern India
Regional … Financing Agencies
Council of ICAI
• With the entry of commercial banks in housing
finance sector, competition has intensified
NHB
Slide 19
Northern India
Regional National Housing & Habitat Policy
Council of ICAI
• The Policy has encouraged all stake-holders in the
housing sector – a strong advocacy document
• Has sought to build a broad consensus on the
approach and strategy
• Prescribes enabling role for the Governments and
Public Agencies
Overview of
Housing • Places reliance on private sector enterprise and
Sector potentials
• Envisions strong, efficient and sustainable public-
private-partnership (PPP) in all segments of the
housing sector
• The Policy has also prescribed a strong collaboration
between the formal/informal sector
• Recognizes the potential of MBS and Secondary
Mortgage Markets as an important source of funds
NHB
Slide 20
Northern India
Regional Need for Mortgage Backed Securities (MBS)
Council of ICAI
• Capital deficient housing sector: Huge volume of
funds required
• Growing disintermediation
• Capital market : Permanent source of funds for
housing in a market oriented environment
Overview of • Need for integration of housing market with capital
Housing
market
Sector
• Need for long term debt market
– Housing finance : a long term financing activity
– Better asset liability management
• Improved balance sheet management by HFIs /Banks
• MBS : a vehicle for carrying forward reforms
NHB
Slide 21
Northern India
Regional MBS : Benefits to Banks / FIs
Council of ICAI
• Risk Diversification : Precludes concentration of
financial risks within the housing finance circuit
• Risk Transfer : Transfer of 100% RWAs to third parties
substantially enhancing own liquidity
• Capital Relief : More loans with no additional capital
Overview of • Ability to leverage resources
Housing
Sector • Continued liquidity and matched funding based on
maturities of assets and liabilities : Better ALM
• Restructuring Debt-Equity Ratio
• Facilitates reduction of credit concentration
• New sources of fee based income : Servicing
NHB
Slide 22
Northern India
Regional MBS : Institutional Framework
Council of ICAI
EMI
Loan Monthly
Borrowers Originator Servicing & H pay-outs
Paying Agent F
Mortgages
Custodian I Investors
Banks
Custody Agreement
Overview of Unrated Mortgages
FIs
Housing Servicing &
Sector Rating Agency Declaration Paying Agency Insurance
of trust Agreement Cos.
Rated Mortgages Mutual
Funds
SPV N
Trustee
Registrar & H
PTCs
Transfer Agent B
Payment of
Consideration
Issue Arrangers
NHB by SPV
Pass- through Certificates
Slide 23
Northern India
Regional MBS : Issues in Indian Context
Council of ICAI
• Legal
• Accounting
Overview of
Housing • Taxation
Sector
• Capital Market
Overview of
Housing
Sector
Thank You
NHB
Slide 26