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FINANCIN

G P R E S E N TA T IO
N B Y :-
PREPARED BY:
•AVICK
GROUP B •
BISWAS

•ISB & M
BANGALORE
WHAT IS
HOUSING
§ Longman dictionary of Contemporary English
says that housing means the houses or
conditions that people live in.
§
§ Housing association is an association
formed by a group of people so that they
can build homes for themselves, or buy
houses for themselves, or buy houses of
their own.
WHAT IS HOUSING
CONTINUED…

§ Housing estate is a large number of houses that


have been built together in a planned way.
§
§ Housing projects is a group of houses or
apartments, usually built with government money
for poor families.
REAL ESTATE
FINANCING
§ A set of all financial arrangements that are made available by
housing finance institutions to meet the requirements of
housing.
§
§ Housing finance institutions include banks, housing finance
companies , special housing finance institutions etc.
§

§ Definition of Real Estate:


§ Land and all physical property on, below or attached to the
land.
§ Example – houses, sewers, trees.
MODELS OF HOUSING
PROJECTS
§ Land and real estate development are carried out in
various ways in different cities in India.
§
§ There are few laws which are applicable for the entire
country, but there are many laws which are
applicable in the respective states only.
§
§ There are small variations in these laws.
§
§
MODELS OF HOUSING PROJECTS
CONTINUED…

§ Town Planning Schemes.


§
§ Housing Board Projects.
§
§ Cooperative Society Projects.
§
§ Private Real Estate Developers.
§
§ Public-private Partnerships.
§
§ Slum Board Projects.
§
§ Government Employees’ Housing.
§
§ Government Programs.
TOWN PLANNING
SCHEMES
§ Many town planning schemes were developed in early 20th
century after enactment of the Bombay Town Planning Act, in
1915.
§
§ The town-planning department prepares the scheme for the
improvement of certain area including land owned by
landowners
§
§ It comprises of earmarking of roads, open spaces ,civic
amenities etc.
§
§ Cities like Bombay, Ahmadabad, Bangalore and Chennai were
developed under these schemes.
§
§
§
HOUSING BOARD
PROJECTS
§ Housing boards are state level organizations.
§
§ Main Objective is to develop housing.
§
§ This is done by acquiring land and then executing
the project on a ‘No Profit No Loss’ basis.
§
§ Funds are obtained from funding agencies or from
purchasers.
§
§
§
COOPERATIVE SOCIETY
PROJECTS
§ It is a popular method of land and housing
development, in which people come together and
form a cooperative society.
§
§ In some places, development authorities allot the
land; while in other places, the society arranges for
land by constructing houses on its own.
§
§
§
§
PRIVATE REAL ESTATE
DEVELOPERS
§ The real estate developer purchases land from the
land owner.
§
§ After getting all the required permission from
various government agencies, the real estate
developer does the booking of the houses and
collects advance money from the end-users.
§
§ The construction is then carried out and the
property is handed over to the end-users.
§
§
§
§
PUBLIC-PRIVATE
PARTNERSHIP
§ Partnership between the private sector and the
government.
§
§ The ultimate goal is better management access to
capital, speedier delivery and better quality.
§
§
§
§
§
§
SLUM BOARDS
PROJECTS
§ They are built on the lines of housing boards.
§
§ They are state level organizations , which carry out
slum clearance and improvements, with emphasis
on resettlement.
§
§ Slum boards created under the slum Acts are
empowered to declare areas as ‘ slums’ and carry
out improvement activities.
§
§
§
§
GOVERNMENT EMPLOYEES’
HOUSING
§ There are a large number of government
organizations both at state and central level
which provide accommodation to government
employees as part of salary perquisites.
§
§ Examples Central Public Works Department, Public
Works Department in various states, the
Railways, the Police , Defense etc.
§
§
§
§
§
GOVERNMENT
PROGRAMMES
§ Various schemes are launched by GOI to promote
housing, such as Indira Awas Yojana.
§
§ Under these schemes, fixed amounts of financial
assistance are given to selected group of people so
that they can build shelter for themselves.
§
§
§
§
§
§
REAL ESTATE FINANCING – MAJOR
ISSUES
§ Despite all the measures taken by the government
to provide housing, housing demand still needs to
be fulfilled.
§
§ Major reasons are shortage of funds and inadequacy
of financial institutions coupled with an increase in
building material, labor and other costs.
§
§ Approximately , the unfulfilled housing demand in
India is currently about 38 million units.
§
§
§
THE MAJOR ISSUES FACED BY INDIAN
REAL ESTATE FINANCING ARE:-
§ ARCHAIC LAWS.
§
§ LACK OF CLEAR TITLE.
§
§ HIGH STAMP DUTY.
§
§ OBSOLETE RENTAL LAWS.
§
§ FORECLOSURE.
§
§ INADEQUATE BUILDING CODES AND STANDARDS.
§
THE MAJOR ISSUES FACED BY INDIAN
REAL ESTATE FINANCING ARE:-
CONTINUED…

§
§ INADEQUATE DEVELOPMENT AND PLANNING.
§
§ INADEQUATE INFRASTRUCTURE.
§
§ RECOGNITION OF HOUSING AS AN INDUSTRY.
§
§ SLUM CLEARANCE AND PUBLIC HOUSING.
§
§ LAND SUPPLY.
§
§ RENT CONTROL ACT.
§
§
REAL ESTATE FINANCING – GROWTH
§ FACTORS continued…
§ Investment in and sale of commercial properties are recently gaining
popularity in INDIA thanks to real estate prices hitting all time low.

§ There are attractive schemes offered by various real estate finance


companies and banks.

§ A developer who comes up with a new property rents it out and then sells it.

§ The investor gets an assured return, the developer churns out enough
money to invest in next projects.
§
§ An investor in a commercial property enjoys returns of 12% to 13% and on a
residential property he can earn up to 5% to 6%.
§
§ An investment in a bank would generate hardly 6% to 7% interests and
investment in a share market is risky, but real estate will offer at least
10% to 15% returns.
§
§
§

§
REAL ESTATE FINANCING – GROWTH FACTORS
continued…
§ Some other factors influencing the growth of real estate financing are:-
§
§ 1. BUDGETARY SUPPORT – TAX benefits and low interest rate with high salary level.
• Bank rate of interest is constantly being slashed.

§ 2. NEW DYNAMICS - The entry of ICICI home Finance, Sundaram Finance and Tata Finance
have changed the real estate finance market.

§ 3. DISTINGUISHING SERVICES - there are similar services by all Housing finance


institutions, therefore a strong brand name is likely to command access to a lot more
resources and customers.
§
§ 4. ACCESS TO RESOURCES - LIC occupies a prime position in real estate finance because
of its access to huge financial resources.
• The access to resources may ensure that bigger companies will dominate the market.
§
§ 5. CHANGING CONTOURS - competition has whittled down the high margins, and
changed real estate finance into low margin, low risk business.
§
§
§

§
REAL ESTATE FINANCING – GROWTH
FACTORS
Market Opportunity CRITICAL MASS
One of the largest, quickly growing and most sustainable industries in INDIA

VALUE & EXIT CAPITAL GAP


onal capital will boost asset values withinLarge
several yearsgap between supply and demand in real es
capital

LEVERAGE
Sophisticated financing solutions became available over recent years

20
Urbanization Trends
Population Projection: 2001-2025
72 71 70
68 66
64

34 36
30 32
28 29

Source : Census Population


Figures
Financing and securitization mechanism for real
estate and construction industry

Real Estate Assets

Constructio
n
company

“Closed Real Estate Mutual


Fund”

Insuranc Individuals
e Private Pension Institution
Banks
Compani Investors Funds al
es Investors
22
Typical Profile of a
Customer
§ Single largest investment in his/her life time
§

§ Typically first time borrowers


§

§ Besides finance, looks for advice on legal and


technical issues
§

§ Generally salaried class individuals.


§

§ Preference for floating rate loans.


§

§ Increased competition has meant more


• choices for the customer.

§
§
FINANCIAL ASSISTANCE - FACTORS
§ REAL ESTATE FINANCING COMPANIES CONSIDER THE FOLLOWING
FACTORS BEFORE MAKING ANY FINANCIAL ASSISTANCE FOR
HOUSING:
§
§ 1. LOAN AMOUNT.
§

§ 2. TENURE.
§

§ 3. ADMINISTRATIVE AND PROCESSING COSTS, ETC.


§

§ 4. PRE – PAYMENT CHARGES.


§

§ 5. SERVICES.
§

§ 6. VALUE ADDITION.
§

§ 7. SOURCES OF FINANCE LIKE HFC’S AND BANKS.


§

§ 8. EMI CALCULATION METHODS.


§
§
§
§
Loan Amt. Tenure Interest EMI Total
(Years) (%) (Rs.) Payment
(Rs.)

1,00,000 5 13 2,275 1,36,500

1,00,000 10 13 1,493 1,79,160

1,00,000 15 13 1,256 2,27,700


Loan Amt. Tenure Interest EMI Total
(Years) (%) (Rs.) Payment
(Rs.)

1,00,000 5 13 2,370 1,42,200

1,00,000 10 13 1,536 1,84,320

1,00,000 15 13 1,290 2,32,200


REAL ESTATE FINANCIAL
INSTITUTIONS
§ THE NATIONAL HOUSING BANK.
§ The national housing bank was set up in July 1988, under an act of parliament.
§ It is wholly owned by RBI.
§

§ OBJECTIVES:
§

§ 1. To promote a sound, healthy, viable and efficient housing finance system to cater to all
segments of the population.
§

§ 2. To establish a network of housing finance outlets to adequately serve different regions


and different income groups.
§

§ 3. To promote savings from housing.


§

§ 4. To make housing more affordable.


§

§ 5. To promote appropriate technologies for housing.


§

§ 6. To augment the supply of land and building materials for housing.


§

§ 7. to augment and upgrade the housing stock in the country.


§

§ 8. to enable the housing finance system to access the capital market for resources.
§
§
§
§
FUNCTIONS OF
NHB
§ 1. PROMOTION FUNCTIONS.
§

§ 2. REGULATORY FUNCTIONS.
§

§ 3. FINANCING FUNCTIONS.
§

§ 4. ASSET SECURITIZATION.
§

§ 5. BUSINESSES.
§

§ 6. BORROWINGS AND ACCEPTANCE OF DEPOSITS.


§

§ 7. POWER TO ACQUIRE RIGHTS.


§

§ 8. ACCESS TO RECORDS / POWER TO INSPECT.


§

§ 9. ADVISORY SERVICES.
§

§ 10. INCOME TAX EXEMPTION.


§
§
§
§
HOUSING DEVELOPMENT FINANCE
CORPORATION LIMITED
§ HDFC WAS INCORPORATED IN THE YEAR 1997.
§

§ ITS MAIN OBJECTIVE IS PROMOTING HOME OWNERSHIP BY PROVIDING LONG-


TERM LOANS.
§

§ IT WAS INCORPORATED WITH A SHARE CAPITAL OF RS. 10 CRORES.


§

• OBJECTIVES:

1.TO INCREASE THE NUMBER OF RESIDENTIAL HOUSES IN THE COUNTRY BY


PROVIDING HOUSING FINANCE IN A SYSTEMATIC AND PROFESSIONAL
MANNER.
2.

3.TO PROMOTE HOME OWNERSHIP.


4.

5.TO INCREASE THE FLOW OF FUNDS TO THE HOUSING SECTOR.


6.

7.TO STRENGTHEN HOUSING FINANCE BY IMPROVING THE DOMESTIC FINANCIAL


MARKET AND FINANCIAL SERVICES.
8.

9.TO MAINTAIN ITS POSITION AS ONE OF THE PREMIER HOUSING FINANCE


INSTITUTIONS IN THE COUNTRY.
10.

§
TYPES OF LOANS OFFERED
BYARE:
§ THE TYPES OF LOANS OFFERED BY HDFC HDFC
§
§ 1. FOR DWELLING HOUSE – LOANS ARE GIVEN TO INDIVIDUALS, BASED ON
THEIR INCOME.
• THEY ARE REPAYABLE OVER A MAXIMUM PERIOD
OF 20 YEARS.
§

§ 2. EXTENSION OF EXISTING HOUSES – LOANS ARE MADE AVAILABLE FOR


EXTENDING EXISTING SMALL HOUSES EITHER BY CONSTRUCTING VERTICALLY
OR EXTENDING HORIZONTALLY.
§

§ 3. PURCHASE OF LAND – HDFC PROVIDES LOANS TO ENABLE INDIVIDUALS TO


PURCHASE LAND OR PLOTS FOR CONSTRUCTING HOUSES.
§

§ 4. REPAIRS / RENOVATION – LOANS ARE GRANTED FOR UNDERTAKING REPAIRS


IN AN EXISTING HOUSE FOR MODERNIZATION.
§

§ 5. LARGE SCALE CONSTRUCTION – HDFC PROVIDES LOANS FOR LARGE SCALE


HOUSING UNDER GROUP HOUSING OR FOR THE EMPLOYEES OF A PARTICULAR
ORGANIZATION ON THE BASIS OF COLLECTIVE RESPONSIBILITY.
§

§ 6. FACILITY TO THE WEAKER SECTIONS – THE CORPORATION PROVIDES


LOANS TO THE PEOPLE BELONGING TO WEAKER SECTIONS OF SOCIETY TO
HELP THEM CONSTRUCT THEIR HOUSES.


LIFE INSURANCE CORPORATION HOUSING
FINANCE LIMITED
§ THE CORPORATION WAS SET UP UNDER THE COMPANIES ACT, 1956.
§

§ IT WAS INCORPORATED ON 19TH JUNE 1989.


§

§ IT IS RECOGNIZED BY NHB ALSO.


§

§ IT IS THE LEADER IN THE REAL ESTATE FINANCIAL MARKET.


§

• FUNCTIONS:

1.TO ASSIST INDIVIDUALS BY PROVIDING FINANCE TO CONSTRUCT/


PURCHASE HOUSE/FLAT .
2.

3.TO PROVIDE ASSISTANCE FOR EXTENSION/RENOVATION OF


RESIDENTIAL UNIT.
4.

5.TO GRANT LOANS TO CORPORATE BODIES FOR STAFF QUARTERS.


6.

7.TO EXTEND LOANS TO CORPORATE FOR OFFICE PREMISES.


8.

9.TO EXTEND BRIDGE LOANS TO REPUTED DEVELOPERS/BUILDERS FOR


HOUSING PROJECTS.
10.
11.
12.
HOUSING AND URBAN DEVELOPMENT
CORPORATION OF INDIA
§ HUDCO WAS INCORPORATED ON 25TH APRIL , 1970.
§

§ HUDCO WAS AN EXPRESSION OF THE CONCERN OF THE CENTRAL GOVERNMENT


TOWARDS THE DETERIORATING HOUSING CONDITIONS IN THE COUNTRY.
§

§ ITS MAJOR CONCERN WAS FOR THE LOW-INCOME GROUP AND ECONOMICALLY
WEAKER SECTIONS.
§

§ HOUSING PROGRAMES UNDERTAKEN BY HUDCO:


§
§ 1. URBAN HOUSING.
§ 2. RURAL HOUSING.
§ 3. COOPERATIVE HOUSING.
§ 4. INDIVIDUAL HOUSING LOANS THROUGH “HUDCO NIWAS SCHEME”
§ 5. STAFF RENTAL HOUSING.
§ 6. REPAIRS , RENEWALS AND UPGRADATIONS.
§ 7. NIGHT SHELTER FOR PAVEMENT DWELLERS.
§ 8. WORKING WOMEN OWNERSHIP CONDOMINIUM.
§ 9. HOUSING SCHEAMS THROUGH NGO’S.
§ 10. HOUSING THROUGH PRIVATE SECTOR.
§
§
§
THANK

•YOU !

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