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Affordable Housing – Way Ahead?

Affordable Housing – Way Ahead?. MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table October 7, 2011 | New Delhi. Pictured: Anandgram Project, Yevat, Pune. CONTENTS. Our Customer Our Product Our Projects Our Technology Current Status

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Affordable Housing – Way Ahead?

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  1. Affordable Housing – Way Ahead? MICRO HOUSING FINANCE CORPORATION Housing Finance: The Emerging Contours CAFRAL & NHB Round Table October 7, 2011 | New Delhi Pictured: Anandgram Project, Yevat, Pune

  2. CONTENTS Our Customer Our Product Our Projects Our Technology Current Status Challenges Partnerships Contact Us Pictured: Worli Village Slums, Worli, Mumbai

  3. OUR CUSTOMER • A Typical MHFC Customer: • Average MHI: Rs. 8,000 to 20,000 • Primarily employed in the informal sector • Average HH Size: 5 • Households with multiple earning members • Currently living in rental housing or illegal tenements • Aspiration to own their own homes Pictured: MHFC customer Badri Thakur at Fanaswadi, Mumbai

  4. OUR PRODUCT • Salient Product Features: • Loan Size: Up to Rs. 10,00,000 • Loan to Value Ratio: 80% • Loan Term: up to 15 years • Interest Rate: 12% to 14% (reducing) • Security: mortgage of the house being financed • Covenants: bank account / ECS Pictured: MHFC Customer, Ibrahim Shaikh in Colaba, Mumbai

  5. OUR LOCATIONS MHFC currently has an active presence in over 45 projects across Urban India: Mumbai Pune Nagpur Surat Ahmedabad Indore Kolkata

  6. OUR TECHNOLOGY • High Investment in Technology: • Enhance credit quality • Use intelligent business software • Create customer information banks • Analyze in-house / acquired customer data (telecoms) to extrapolate and make credit decisions • Reduce operating costs • Set up efficient disbursal systems • RTGS, ECS payments, mobile telephony platforms Pictured: MHFC customer Kailash Naikwade in Sadashiv Peth, Pune

  7. CURRENT STATUS • NHB COR received inFebruary 2009 • Capital : Rs. 36.5 crores • Commenced operations inJune 2009 • Total Applications Received: 1332 • Total Loans Sanctioned:1118 • Total Amount Sanctioned:Rs. 45.39 crores • Average Loan Size:Rs. 4 lakhs • Number of Approved Projects: 45 • NB: All numbers updated as of October 5, 2011 Pictured: MHFC customer Chandrakant Kharvi in Bhayendar, Mumbai

  8. CHALLENGES • Customer Challenges • Builder Challenges • Policy Challenges • Regulatory Challenges Pictured: MHFC customer Bharat Sharma in Meghdoot Nagar, Indore

  9. CHALLENGES Customer Awareness & Self Exclusion • Lack of awareness on affordable housing options and formal housing finance • Ineligibility  self exclusion from seeking housing options • Solution: Increase awareness via on-ground marketing & partnerships Decision Making • Longer decision making time  crowding out • Solution: Allow booking / reservation of pre-approved flats on behalf of customer Collection Mechanisms • Banks are expensive collection mechanism options • Solution: Mobile repayments via mobile wallets / platforms Pictured: MHFC customer Rahul Singh in Boisar, Thane

  10. CHALLENGES Builder Lower Construction Costs • Functional construction design • Cost-effective construction materials • Improved use of technology • Speed of construction Approach to LIG Housing Construction • Project and Assembly-line approach to construction • Land as working capital vs land as appreciating asset • Access to project finance to create ready-for-sale units • Reducing approval times Pictured: Vaishnavi Sai Complex in Virar (E), Mumbai

  11. CHALLENGES Regulatory • Automatic SARFAESI clearance for all housing finance companies • Long term credit guarantee • Increasemarket capital available in affordable housing finance sector through commercially viable solutions like: a) Refinance • Better terms for smaller ticket size loans, including more liberal coverage ratio • “Urban + Small Ticket, similar to rural refinance • Cheaper and more easily available b) Priority Sector Definition • Current definition: < Rs. 20 lakhs • Proposal: additional benefits for < Rs. 5 lakhs Pictured: MHFC customer Jalinder Mhoprekar in Crawford Market, Mumbai

  12. CHALLENGES Financial Past vs. Future Financing Loans sanctioned based on past disbursals instead of future Solution: disbursal milestones Financing Terms Current: based on creditworthiness of owners vs. business Solution: based on business model & cash flows Develop Long Term Debt Markets Current: only short term financing (5 yrs) available vs. customer repayments over 15 yrs  asset liability mismatch Solution: direct access to ECBs or through the NHB Pictured: MHFC customer Chandrakant Kharvi in Bhayendar, Mumbai

  13. PARTNERSHIPS Banks - Identify customers - Service customers - Customer referrals (two-way) NGOs & MFIs - Share customer information - On-ground marketing / awareness Corporates Spreading the word among employees that fall within our customer segment (contracutal and non-contractual) Telecoms Customer databases Pictured: MHFC customer Shankar Khatawat with his family in Yavat, Pune

  14. CONTACT US Micro Housing Finance Corporation # 3 Victoria Building, 1st Floor SA Brelvi Marg, Off Horniman Circle Fort, Mumbai 400001 Tel: (022) 2266 0130 or 0427 Email: contact@mhfcindia.com Website: www.mhfcindia.com Pictured: MHFC customer Laxman Thorat in Crawford Market, Mumbai

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