Professional Documents
Culture Documents
103
borrower, nor a lender be, would, if followed, make it impossible for most
people to own their homes.iii
3. Imbalance between its supply and Need
The problem of housing finance emanates from the limitations of means
compared to huge investment needs of housing. Always financial needs of
housing fall short of the provision of finance. This universal phenomenon of
housing finance is the probable reason for the World Bank to maintain a feeling
that housing is a bottomless pit.iv
This imbalanced condition of housing finance is prevalent both in
affluent and poor countries, and this is worse when we talk of poor and
underdeveloped countries.
4. Housing Finance is not as Self Liquidating as Agricultural Finance of
Industrial Finance.
This peculiar feature poses a big problem in housing finance. An
investor, either in agriculture or in industry, can look for a further income
stream as the source of repayment. That is to say, agricultural or industrial
investment usually yields quick return. But housing investment is not so. It is
true that house, after the completion, can be rented out which will start yielding
a return, but this will be a very insignificant amount in relation to the huge
investment, and also will come month by month very slowly and leisurely. That
is why the lenders are reluctant to lend to house builders. Therefore, while in
agriculture, or in industry interest forms only a small proportion to total annual
cost, in the case of housing it is the largest recurring cost factor. Hence, housing
finance is much more sensitive to the level of interest rates than agricultural
and industrial finance.
A significant thing that emerges from the foregoing analysis is that
housing needs long-term finance. But the paradox is that in India the so-called
long-term is less than the medium term of most of the developed countries. In
104
105
106
is not easy to trace out these information correctly and if at all successful in
that because of the Punjab land Alienation Act and similar laws it is not easy to
take possession of the mortgaged house property by resorting to court. Further,
the complexities of mortgage loan-laws may give rise to substantial expenses
on the part of the lender, if the borrower defaults on his loan.
Since housing finance is involved deeply in these risks, housing does not
have the normal facilities of finance available to either agriculture or industry.
In view of these risks and problems of housing finance, one can rightly
conclude that financing of housing programmes presents a knotty problems for
the lower income groups and these problems are of universal nature, prevalent
both in advanced and developing countries. It is commonsense to consider
these risks and problems all the more present in this underdeveloped country
where there is widespread poverty and backwardness and little experience in
the field of housing.
107
the actual, government identified housing sector as a core and it is only with
the timely in intervention of the government that housing finance has become a
major industry in India. With the establishment of National Housing Bank, the
government has provided the much-needed boost to this sector. At present out
of 380 odd HFIs in India, 42 housing finance companies are registered with the
National Housing Bank out of them 20 are valid for acceptance of public
deposits and remains are not. This number is going to increase in the near
future with the industrial growth. Throughout the second part of the last
decade, this sector has witnessed a growth of over 30 percent and promises to
grow the same rate in the next couple of years. Recognizing the growing need
of housing finance in India, the government has emphasized on housing and
housing finance in the ninth five year plan to know that there is a short fall of
more than 20 mission house units. This is the first time that India has
emphasized on the housing sector.
Even the Asian development Bank has embarked on a two-fold strategy
for Indias housing sector. One is focusing on providing funds to financial
intermediaries who in turn, lend to individual borrowers at the household level.
The second objective is combining slum upgrading and micro credit schemes
for lower income groups in its state level specific integrated urban development
projects. These latest development in the housing sector has made housing
finance one of the growth drivers for the Indian economy in the last decade
what earlier remained as an isolated segment has now transformed itself into a
core sector. Housing finance in India is getting recognition as a specialized
finance product, thanks to the efforts of housing finance companies and the
subsidiary outfits of banks, specializing in this area.
To regularize the housing finance sector in India, the government has set
up HUDCO in 0970vii. It was soon followed by setting up of the Housing
Development Finance Corporation (HDFC) in 1978 in the private housing
finance sector with the support of ICICI, the International Finance Corporation
109
and the Aga Khan Fund. The major objective behind setting up of HDFC and
HUDCO has been to enhance the residential housing stock by providing an
avenue for housing on a systematic and professional basis. Another inherent
objective was to increase the flow of resources to this sector by integrating the
domestic housing sector with the capital markets. Till 1988, HDFC was the
only formal housing finance company operating in India and it is after 1988,
the Banks and insurance companies forayed into this sector. With the entry of
insurance giants like Life Insurance Corporation of India (LIC) in 1989 and the
General Insurance Corporation (GIC) in 1990. The sector witnessed a threefold increase in activity. Almost a similar point of time, public sector banks also
forayed into this sector Canara Banks Can fin home, State Bank Of Indias SBI
Home Finance. No doubt, the market has immense untapped potential as well
as growth. In the last five years, the housing finance market in India has been
witnessing a growth of over 30 percent and it is expected that this will continue
in the next couple of years. According to an independent survey, about 60
percent of the Indian households approach informal sources of finances to
borrow funds. It is estimated that if the present rate of growth of population
continues, then by 2010 India would require of an average 2.5 million to 3
million additional houses annually. At present only 20 percent of the new
houses are constructed by the finance of formal housing finance companies. If,
atleast 50 percent of this informal market turns into formal market then it
means a huge fortune for the housing finance institutions.
Housing finance industry did not has much formal introduction because
traditionally, as far as the builders are concerned, financing of construction is
largely done through advances from customers which in turn will affect the
demand for housing. In early eighties salaried individuals who wanted to buy
flats did not have many institutions to approach for finance. Raising finance for
acquiring a house was a painful process, as the house hunt itself. Only a few
institutions in the market were there to help individuals to acquire finance, and
110
that too at exorbitant rated of interest. The few housing finance institutions in
the market were HDFC and a few back, and small number of non-banking
companies. Moreover their reach was largely restricted to the major cities and
they were known to a select few. The rates of interest ranged between12%
to18% and it was basically a sellers market but now if we see the present
situation of the housing market, there is sea change in the recent years
specially, last two decades. The development of Housing Finance System in
India in the form of institutionalised and formal housing finance super structure
is relatively of a recent origin.
In present picture, Housing Finance System in the country represents a
few players like Government and its Housing agencies, General financial
Institutions, Insurance Sector, Banks and specialized Housing finance
Companies, Private sector extending housing finance and staff quarter facilities
to their employers. In addition there is a large informal sector, which meets
over two-third of the housing finance in the country. This segment represents
mainly self-help resources for housing financing (Consisting of money-lenders,
extended family members, relatives, friends, employers, business associates,
the persons own accumulated savings and resources obtained through sale of
property etc.)
111
PHASE-I
1998-2003
2003 onwards
PHASE-II
PHASE-III
Specialized
Lenders Housing
Finance Companies
(HFCs)
Aggressive entry
of Banks HFCs
loose market
share
Bank/Insurance Co
sponsored HFCs
Irrational
competition
Builders promoted
HFCs
Rapid
disbursement
Company promoted
HFCs
Credit quality
issue
112
Oligopolistic
market structure
Top 3 key players
have over 80% of
incremental
More rational
market
Sustained
mortgage growth
at 25%
GROUP
Sub GROUP
CHANNEL
NHB
Development Financial
Institutions
Financial Institutions
Non-Banking Finance
Companies
Scheduled Commercial
Banks
NABARD
Housing Finance
Companies
Other NBFCs
Private Sector Banks
Banks
Co-operative Banks
Other Institutions
Development Banks
Apex Co-operative
Housing Societies
Housing Societies
113
I
C
Organised Sector
On the basis of
Information
Private
HDFC
DHFL
TATA
GLOBAL
Public
HUDCO
BANKS
LIC`
GIC
Unorganised Sector
Small private financers,
Household saving, Loan from
relatives and friends
On the basis of
Registration
Registered
with NHB
HDFC
HUDCO
LIC HFL
GICHF
Unregistered
with NHB
Commercial
Banks
On the basis of
Operation
Specialised Housing
Institutions
Non-specialised
Housing Institutions
HDFC Commercial
HUDCO
Banks
LICHFL
GICHF
Cooperative housing
Finance Societies
115
It was the seventh plan (1985-90), however, that brought about a radical
change in government policies. As Garg puts it, the plan emphasised the need
for radical reorientation of all policies relating to housing and argued that the
major responsibility of house construction would have to be left to the private
sector, and in particular, the household sector. Further, the government should
be involved in housing not so much to build but to promote housing activity
(Garg, 1998). It was also during this time that several reforms were made. The
UN Global Shelter Strategy, of which India subscribed to, was passed in the
UN General Assembly in 1988. This gave the impetus to the drafting of a
National Housing Policy for the first time. Another major reform that took
place at the time was the founding of the National Housing Bank (NHB) in
1988. The NHB was founded to promote and regulate housing finance
companies and to mobilise additional resources for housing. A Building
Materials and Technology Promotion Council was also formed. During this
period, several housing finance companies were promoted. Commercial banks
still shied away from direct lending to housing finance.
The eighth plan (1992-97) built on the foundations of the seventh plan,
again acknowledging that housing related activities belonged in the private
sphere, although admitting that there was room for state intervention to provide
housing to low-income groups. It was during the eighth plan that the National
Housing Policy was first adopted by Parliament in 1994. Importantly, the plan
recognised that urbanisation was inevitable and concentrated resources on
upgrading urban centers. It recommended that reforms should be made on both,
the financial and legal aspects to allow the mortgage market to develop further.
It laid special emphasis on government incentives to enhance the flow of credit
to the housing sector through housing finance institutions.
Both the ninth (1997-2002) and tenth (2002-2007) plan recommended
further reforms to enable the government to play its role as a facilitator and
encourage the development of the mortgage market. Emphasis was particularly
116
laid on market friendly reforms for improving both taxes and infrastructure to
help increase investments into housing. Both plans stress on abolishing old
laws. In 1999, the central government repealed ULCRA. The government also
adopted a revised National Housing Policy in 1998 and prepared another draft
in 2005. The ninth and tenth five-year plans are also characterised by the
aggressive entry of commercial banks into housing finance.
Government initiatives to develop housing sector in India:
o 1970: HUDCO was established in 1970, as a fully owned Government
of India enterprise with a view to ameliorate the housing conditions in
the urban and rural areas of the country, and assist various agencies
dealing with housing and urban development in a positive manner.
o 1978: The Finance Minister announced the very graciously to launch
HDFC at the inaugural function held in Bombay on Dassera Day, oct.22,
1977. Formally it was launched and started operation on July 18, 1978.
o 1987: Indias insurance act was emended to allow LIC and GIC to
directly issue mortgage loans.
o 1988: NHB was created to implement Governments new vision of the
housing finance system. It is an apex housing development institution
created to regulate, Monitor and foster housing finance market. NBH
gets its funds from long-term loans form RBI, LIC, GIC, USAID, bonds
equities and profits from mobilizing household deposits.
o 1989: RBI began to allow commercial banks to make large loans for
housing without an interest rate on loan quantity cap.
o 1990: RBI asked these banks to devote 1.5% of their incremental
deposits to direct mortgage lending for housing and/or loans to housing
finance intermediaries.
117
118
120
Table 4.6.1
Housing Investment during the Five-Year Plans
(Rs. in Crores)
Total Investment in Economy
Plan period
Public
Private
Total
Private
900
250
First plan
1560
1800
3360
(21.7)
(1951-1956)
(46.4)
(53.6)
(78.3)
1000
300
Second plan
3650
3100
6750
(23.1)
(1956-61)
(54)
(46)
(16.9)
1125
425
Third plan
6100
4300
10400
(27.4)
(1961-66)
(58.6)
(41.4)
(72.6)
2175
625
Fourth plan
13655
8980
22635
(22.3)
(1969-74)
(60.3)
(39.7)
(77.7)
1044
3636
Fifth plan
31400
16161
47561
(22.3)
(77.7)
(1974-79)
(44)
(66)
1491
18000
Sixth plan
97500
74710
172210
(7.7)
(92.3)
(1980-85)
(56.6)
(43.4)
2458
29000
Seventh plan
168148
180000
348148
(7.8)
(92.2)
(1985-90)
(48.3)
(51.7)
31500
66000
Eighth plan
797950
(32.3)
(67.7)
(1992-1997)
52000
99000
Ninth plan
(34.4)
(65.6)
(1997-02)
415000
311300
Tenth plan *
(57.1)
(42.9)
(2003-07)
507318.1@
373560#
Eleventh plan
(57.6)
(42.4)
*(2007-2012)
Figures in brackets indicate the percentage share to respective total
%of
public
housing
to public
total
%o
private
housing
to
private
total
%of
investment
in housing
to total
investment
1150
16
50
34.2
1300
8.2
32.3
19.3
1550
26.2
14.9
2800
4.6
24.2
12.4
4680
3.3
22.5
9.8
19491
1.5
24.1
11.3
31458
1.5
16.1
Total
97500
12.2
151000
726300
880878.1
121
Disbursements
2001-02
2002-03
2003-04
2004-05 2005-06(P)
2006-07(P)
14614.44
17832.01
20862.23
26000
29,500
32,500
8566.41
23553.37
32816.39
50398
60,000
67,000
677.58
641.48
623.08
421.1
500
500
23858.43
(25.18)
42026.86
(76.15)
54301.7
(29.21)
76819
(-41.47)
90,000
1,00,000
Figures in brackets are indicate percentage growth over the previous year
122
Towards the mid and late 1980s a few housing finance companies were
set up either as private limited companies (e.g. Dewan Housing Finance
Limited) or as a joint venture with partnership from the state government (e.g.
Gujarat Rural Housing Finance Corporation) or bank sponsored housing
finance companies (e.g. Can Fin Homes, SBI Home Finance, PNB Housing
Finance). Even state owned insurance companies like the Life Insurance
Corporation and the General Insurance Corporation of India set up housing
finance arms.
With the recognition of the need to develop a network of specialised
housing finance companies, also came the need for a dedicated apex agency for
promotional and financial functions in the housing finance sector, which was
earlier under the purview of the Reserve Bank of India. As an outcome of the
recommendations of the High Level Group set up by the Government of India
on housing by Dr. C. Rangarajan, then Deputy Governor of the Reserve Bank
of India and the National Commisssion of Urbanisation, the National Housing
Bank (NHB) was established in July 1988 under an act of Parliament viz. the
National Housing Bank Act, 1987. The objective of the National Housing Bank
is to function as a principal agency to promote housing finance institutions and
to provide financial and other support to such institutions. The act empowers
the National Housing Bank to first, issue directions to housing finance
institutions to ensure their growth on sound lines. Secondly, make loans and
advances or render financial assistance to scheduled banks and housing finance
institutions or to any such authority established by or under any central, state or
provincial act and engaged in slum improvement. Thirdly, formulate schemes
for the purpose of mobilisation of resources and extension of credit for
housing.
The major financial institutions, which finance housing sector may be
classified in to two broad groups depending upon whether housing finance is
their (i) Primary function (Specialised housing finance institutions like HDFC,
123
Specialised housing finance institutions have been set up with the sole
purpose of financing house construction/purchasing activities. HUDCO was
established on 25th April 1970ix, as a wholly owned subsidiary and government
owned enterprise with a view to ameliorate the housing conditions in the urban
and rural areas of the country, build new satellite towns, finance building
material industries, undertake consultancy in the areas of housing and urban
development, conduct research in low-cost and assist various agencies dealing
with housing and urban development in a positive manner. In brief, the
principal mandate of HUDCO is to ameliorate the housing conditions of lowincome group and the Economically Weaker Sections. With the expansion of
HUDCOs authorized capital form Rs. 2 crores to Rs. 2500 crores in March
2002. Today, HUDCO is financially a strong company with a paid up capital of
Rs. 2001.90 crores and net worth Rs. 3588.55 crores, equity infusion projected
during the 9th period from Ministry of Urban Development and Poverty
Alleviation related to housing and urban development activities, and the
Ministry of Rural Development for rural human settlement activities, HUDCO
has geared to increase its resource mobilization in a substantial manner during
the 10th plan period. Over the years, the equity base has been expanded by the
government. It has further been able to mobilized additional resources from
institutional agencies like LIC, GIC, UTI, banks International assistance,
USAID as well as through public deposits. The cumulative resource base of
HUDCO is Rs. 5056 crores, comprising of equity of Rs. 298 crores, reserves of
Rs. 367 crores and borrowing of Rs. 4400 crores. Overall sanctions and
released since the establishment of HUDCO by the end of 9 th plan amount were
Rs. 42012 crores and Rs. 29334 crores respectively.
124
place to go for housing finance. Ever since its incorporation, it has financed
over 1.2 million units. The institutions share in the organized housing finance
market in India is over 36%. HDFC is pioneered the concept of housing finance
in the private sector and was instrumental in the development of the industry.
ICICI promoted HDFC as development financial institution. It prepared the
initial feasibility study report which helped in securing equity participation
form International Finance Corporation and the Aga Khan Foundation for
economic development and paved the way for the mobilization of equity
participation by LIC, GIC, commercial Banks and large number of industrial
housed in HDFC.
NHB (National Housing Bank)The NHB (National Housing Bank) established by and act of parliament
(1987) as an apex housing finance institution, started functioning from July 9,
1988. The bank is wholly owned by the RBI (Reserve Bank of India) the NHB
at present has a capital of Rs. 450 crores, fully paid up the RBI. NHB is
responsible, inter alia, for the development of housing finance system on sound
lines. The NHB is empowered under the provision of the NHB act, 1987 in
public interest by general/ special order to regulate/ prohibit issue of
advertisement to solicit deposits from public by HFCs it can also specify the
conditions subject to which such advertisement is issued. It can direct HFCs to
furnish in the prescribed from specified intervals, within the stipulated time,
information/particular in the prescribed statements relating to/ connected with
deposits collected by them. The information, inter alia, may relate to the
amount of deposits, purpose and period of deposits, rates of interest, and other
terms and conditions, in public interest, direction can given to HFCs in general
or in particular regarding matters such as receipt of deposits, rates of interest
and other terms and conditions. In public interest, direction can given as receipt
of deposits and so on. If HFCs do not comply with any such directions, the
NHB can prohibit the acceptance of deposits by them. It is also empowered to
126
direct HFCs to send a copy of the balance sheet, and profit and loss account/
other annual accounts of depositors holding specified amount of deposits. They
must furnish statement/information/particulars in compliance with directions in
the prescribed time to time. It is the duty of the auditors of HFCs to enquire
about the compliance with the NHB directions submission of statements/
information/particulars. If they are not satisfied, they must submit a repost to
the NHB giving the aggregate deposits. Such reports should also form part of
their statuary reports under the companies Act. The NHB can conduct and
inspection by its officers/employees or other persons of HFCs to verify the
correctness and completeness of statements/information/particulars furnished
by them. Such inspection can also be conducted to obtain information, which
the HFCs have failed to furnish in compliance with the directions. The
direction/member of committees/ other employees/officers/must provide to the
inspecting authority, all statement, and information, within a specified time.
Milestones of NHB
Financial
Year
1988-89
1989-90
1990-91
1991-92
1992-93
1994-95
1997-98
Particular
1. Refinance Schemes for housing loans
2. Schemes for Land Development & Shelter Projects
3. Scheme for Equity Participation in Housing Finance Companies
(HFCs)/Building Materials Companies
1. Home Loan Account Scheme
2. Housing Finance Companies (NHB) Directions, 1989
3. Raised Loan of US$25m (first tranche) under USAID Govt.
Housing Guaranty Program
1. Notified as a Public Financial Institution
1. Received a Loan Assistance of Yen 2,970 billion from OECF (now
JBIC) 2. Scheme for Financing Housing Infrastructure
1. Refinance Schemes for Slum Redevelopment Projects
1. Launched the issue of Unsecured Bonds
1. Guidelines for Prudential Norms for HFCs
1. Golden Jubilee Rural Housing Finance Scheme (GJRHFS)
2. Issued Tax Free Bonds to finance
3. Drawn from ADB US$20m in 1997-98 and US$30m in 1998-99
GJRHFS
127
1999-2000
2000-01
2001-02
2002-03
2004-05
2005-06
2006-07
2007-08
128
3
4
5
8
9
10
11
12
13
14
15
16
17
18
19
20
129
Haware's Housing
Development Finance
Corporation Ltd.
416, Vardhman Market, Sector 17, Vashi, Navi Mumbai400 075. MAHARASHTRA.
Sl.No.
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
111, First Floor, Vardhman Janak Market, Plot CSC A/2B, Janak Puri, New Delhi -110058.
301-302 Hassanand Complex, Godha Street, Nanpura,
Surat-395001. GUJARAT.
F-60, 2nd Floor,Malhotra Buiding, Connaught Place,
NEW DELHI
U-2/4-Ashirwad Square, Opp. Sosya Circle, UdhnaMagdalla Road, Surat-395007. GUJARAT.
34/413- Old Post Office Building- Beach P.O.
Thiruvanathapuram-695007. KERALA.
Building No.2, Apna Bazar, SFS Compound, Jaina Road,
Aurangabad-431005. MAHARASHTRA.
A-14-Mohan Cooperative Industrial Estate, Mathura
Road, New Delhi-110 044. DELHI.
Opp. Building No. 163, Near Jain Temple, Naidu Colony,
Pant Nagar, Ghatkopar (East), Mumbai - 400
075.MAHARASHTRA
3 Pushpa Apartments, General Vaidya Chowk, Jalgaon
425 002 MAHARASHTRA
Orange City Tower, Near Panchsheel Square, Dhantoli,
Nagpur-440012. MAHARASHTRA
Ashoka Market Building(3rd Floor), Station Square,
Bhubaneshwar-751 009. ORISSA.
7&8, C.I.T. Road, 2nd Floor, Entally, Kolkata 700 014.
WEST BENGAL
4th Floor, KHB Complex, Cauvery Bhavan,
Kempegowda Road, Bangalore-560 009.KARNATAKA
Sahara India Sadan, 2 A, Shakespeare Sarani, Kolkata 700 071.
"Parishram" Madan Mahal Chowk, Nagpyur Road,
Jabalpur-482001. MADHYA PRADESH
321-SM Lodha Complex, Near Shastri Circle, Udaipur313 001. RAJASTHAN.
A1-207, Laram Centre, Opp. Railway Station, S.V. Road,
Andheri (W), Mumbai 400058 MAHARASHTRA. .
Meghalaya Tower (2nd Floor), Church Road, Jaipur302001. RAJASTHAN.
Raghunathpur, Jagatsingpur-754 132. ORISSA.
759/74, Prabhat Road, Deccan Gymkhana, Pune 411 004.
MAHARASHTRA
130
Table 4.6.3
Economic Condition of NHB
(Amount in Rs. Million)
st
2004
2005
2006
2007
2008
Capital
4,500
4,500
4,500
4,500
4,500
Reserves
12,061
12,013
12,877
13,891
15,578
16,568
32,974
16,443
80,894
17,295
59,970
18,292
56,716
19,988
90,364
Loans& Advances
82,840
124,758
162,410
195,719
176,712
Total Assets
131,075
186,966
195,888
212,234
198,979
Gross NPAs
289
277
274
271
Nil
Net NPAs
Nil
Nil
Nil
Nil
Nil
1,181
30.1
440
22.5
864
22.3
1,143
22.6
1,697
24.5
131
LIC Housing finance Ltd. Was incorporated in 19 July, 1989 by the LIC
along with ICICI, UTI and IFCI as co-promoters with authorized capital of Rs.
100 crores and paid up Capital of Rs. 75 crores with of no of initial employees
649 and with the 67 operating offices along with 100 extension counters/camp
officers, 6 regional offices and the corporate office at Mumbai. It subsequently
went public in September, 1994 at a premium of Rs. 50 per share. Presently, the
company is the largest housing finance company in terms of markets share next
only to HDFC. Sharp share holding pattern of LIC Housing Finance Limited is
IFCI is 12.71%, UTI 12.17%; GIC 3.03%, LIC 38.43% others 34.30%.x
(ii) Commercial Banks:
Table 4.6.4
Housing Finance by Banks
(Rs. In crore rupees)
Sr.
No.
Sector
1
31-Mar-06
31-Mar-07
31-Mar-08
14,45,531
18,48,166
22,47,437
40,2,635
27.9
3,99,271
21.6
40,691
46,927
44,399
6,236
15.3
-2,528
-5.4
14,04,840
18,01,239
22,03,038
3,96,399
28.2
4,01,799
22.3
1,85,203
2,30,994
2,55,653
45,791
24.7
24,659
10.7
5,10,738
6,34,142
7,38,686
1,26,404
24.2
1,04,544
16.5
1,33,200
1,60,345
1,82,646
27,145
20.4
22,301
13.9
3
3.1
4
4.4
Table (4.6.4) shows the housing finance disbursed by banks total loans
to housing was 27,145 crores in 2006-07which decreased up to 22,301 crores
during the year 2007-08.
The Reserve Bank of Indias initial efforts to encourage commercial
banks in housing finance came in the form of directed credit. This included
132
regime, rising disposable incomes, relatively stable property prices and fiscal
incentives made housing finance an attractive business. Further, housing
finance traditionally has been characterised by low non-performing assets and
given the vast demand for housing loans, almost all the major commercial
banks plunged into the business of home loans.
(iii) Cooperative Sector:
The Cooperative Housing Movement is receiving support over
consecutive Five Year Plans and a strong institutional framework is getting
evolved within the Cooperative Movement. In States where Cooperative Acts
and Rules were not enacted, the Acts and Rules of other States were extended
and adopted. With the introduction of these rules and regulations, the
registration of primary cooperative housing societies has been made easy.
Along with this, State level apex cooperative housing federations have also
been formed. These provisions have helped the primary cooperative societies in
securing finance for construction of houses. The number of primary housing
cooperatives, which was 5564 in 1959-60, has increased to 92,000 in 20042005 with a membership of 66 lacs. The number of State level Apex
Cooperative Housing Federations has increased to 25xi .
A two-tier structure is existed in the field of cooperative housing. At
grass toot level thee are primary cooperatives housing societies and at the state
level the apex cooperative housing federations which provide funds to the
primary housing cooperative in their respective jurisdiction.
The primary societies the primary cooperatives can briefly be classified into
following 4 groups;
1. Tenant ownership housing societies
2. Tenant co-partnership housing societies.
3. House mortgage societies
4. House construction or house building societies.
134
Table 4.6.5
Share of Different HFI in Housing Finance Market
(i)
(ii)
(iii)
(iv)
(v)
(vi)
38.40%
9,6%
23.40%
18.00%
2.80%
4.10%
96.30%
Source: Report of the 11th five year plan, working group on Urban housing, Govt. of India, Ministry of
Housing and urban poverty alleviation, New Delhi.
Table (4.6.6) shows that during the first three years of 10th Five Year
Plan i.e. 2002-03, 2003-04 and 2004-05, the Apex Cooperative Housing
Federations could raise an amount of Rs.1774.43 crore from various funding
agencies like LIC, NHB, HUDCO, Commercial and Cooperative Banks and
other sources. The Apex Federations disbursed loans of the order of Rs.1685.71
crore to their primary housing cooperatives as well as individual members for
135
the construction/financing of 1,26,071 housing units during the first three years
of 10th Five Year Plan. The year-wise details are given below:
Table 4.6.6
Details of Loan Disbursement and Number of Housing Units Financed by
Apex Federations during 2002-2003 to 2004-2005
Year
2002-03
2003-04
2004-05
Total
641.48
623.08
421.15
1685.71
Source: Report of the 11th five year plan, working group on Urban housin , Govt. of India, Ministry of
Housing and urban poverty alleviation, New Delhi.
State
Governments
for
allocation
of
serviced
land
at
Real
Estate
Development
Council
(NAREDCO)
and
the
137
construction
buildings/complexes,
of
residential,
development
of
commercial
townships,
and
provision
institutional
of
urban
138
139
Table 4.7.1
Income wise distribution of Housing Requirement
Sl
No.
1
2
3
Category
Basis of Assumption
Pucca Housing
(a) EWS
EWS New -43% of Pucca
(i) Shelter upgration
12.5% EWS New
(ii) Sites & Services
12.5% EWS New
(iii) Skeletal Housing
25% EWS New
(iv) Plotted Housing
50% EWS New
(b) LIG
LIG New -38% of Pucca
(c) MIG
MIG New -11% of Pucca
(d) HIG
HIG New -8% of Pucca
Semi-Pucca
EWS
upgradation
Kutcha upgradation
EWS
TOTAL NEW HOUSING (1+2+3)
7.27
(in millions)
Total Housing
Units
6.00
2.58
0.32
0.32
0.64
1.29
2.28
0.66
0.48
0.89
0.38
Source: Report of the 11th five year plan, working group on Urban housin , Govt. of India, Ministry of
Housing and urban poverty alleviation, New Delhi.
140
Table 4.7.2
Unit Cost of House Construction
Unit costs of Construction adopted for Million-plus Metropolitan cities
Category
Basis of
Assumption
Unit Cost in
Rs./Hsg Unit
EWS
78% of EWS(P)
97,500
Shelter Upgradation
35% of EWS(P)
43,750
57% of EWS(P)
71,250
Complete EWS
EWS(P)
1,25,000
LIG
LIG(P)
2,00,000
MIG
MIG(P)
1,207,000
HIG
HIG(P)
1,810,500
35% of EWS(P)
43,750
50% of EWS(P)
62,500
40% of EWS(P)
50,000
75% of EWS(P)
93,750
th
Source: Report of the 11 five year plan, working group on Urban housing , Govt. of India, Ministry of
Housing and urban poverty alleviation, New Delhi.
Note-The unit cost in million plus metros has been taken as equivalent to Rs.1,25,000 for EWS and
Rs.2,00,000 for LIG.
141
Table 4.7.3
Housing Investment Requirement during XI plan
Category
Total
Hsg
(62.2%)
Unit
Hsg
Units
7.47
households
Relieving
Congestion
Upgradation of
Kutcha
Replacement of
Obsolete houses
Total
Unit Cost
Total Inv.
in Rs./Hsg
(Rs.
Unit
Million)
4.65
78,000
362700
12.67
7.88
40000
315200
2.18
1.36
35,000
47600
2.39
1.49
75,000
111,750
24.71
15.3
565539
Grand Total
(37.8%)
Unit
Requirement
Hsg
Cost in
Total Inv.
(Rs.
Units
Rs./Hsg
(Rs.)
Millions)
97,500
274950
637650
50,000
239500
554700
43,750
35875
83475
93,750
84,375
196125
429610
1471950
Unit
2.8
2
4.7
9
0.8
2
0.9
9.3
4
Source: Report of the 11th five year plan, working group on Urban housing , Govt. of India, Ministry of
Housing and urban poverty alleviation, New Delhi.
142
The fund required for meeting the additional (New) housing units during
the XI plan period was estimated in table (4.7.4).
Table 4.7.4
Investment Required to cover Housing Requirements at the
beginning of the 11th Plan
(Hsg. Units in millions)
Category
EWS
Shelter
Upgradation
Sites &
Services
Skeletal
Housing
Plotted
Housing
LIG
MIG
HIG
Semi-Pucca
upgradation
Kutcha
upgradation
Total new
Total
hsg
Hsg
sunits
units
0.32
0.2
0.32
Total
Hsg
investment
units
78000
15600
0.12
97,500
11700
27300
0.2
35000
7000
0.12
43750
5250
12250
0.64
0.4
57000
22800
0.24
71250
17100
39900
1.29
0.8
100000
80000
0.49
125000
61250
141250
2.28
0.66
0.48
1.42
0.41
0.3
160000
965600
1448400
227200
395896
434520
0.86
0.25
0.18
200000
1207000
1810500
172000
301750
325890
399200
697646
760410
0.89
0.55
50000
27500
0.34
62500
21250
48750
0.38
0.24
35000
8400
0.14
43750
6125
14525
Unit Cost
7.26
4.52
2.74
2141231
housing
Source: Report of the 11th five year plan, working group on Urban housing , Govt. of India, Ministry of
Housing and urban poverty alleviation, New Delhi.
143
The total fund requirement in the urban housing sector for the XIth Plan
period was estimated to be Rs.361318.1 crores. The summary of investment
requirements for XI Plan period was indicated below:
Scenario
Housing Shortage at the beginning of XI Plan Period
New additions to the housing stock during the XI Plan
Period including the additional housing shortage during
the plan period.
Total Housing Requirement for the XI Plan Period
Investment Requirement
(in Rs. crores)
147195
214123.1
361318.1
Source: Report of the 11th five year plan, working group on Urban housing , Govt. of India, Ministry of
Housing and urban poverty alleviation, New Delhi.
Table 4.8.1
LOAN DISBURSEMENT DURING 11th PLAN
Institutions
Commercial Banks
HFCs
Co-op. Institutions
Total
2002-03
23,553
17,832
642
42,027
2003-04
32,816
20,862
623
45,301
2004-05
50,398
26,000
421
76,819
2005-06 (P)
60,000
29,500
500
90,000
2006-07(P)
67,000
32,500
500
1,00,000
Source: Report of the 11th five year plan, working group on Urban housing , Govt. of India, Ministry of
Housing and urban poverty alleviation, New Delhi.
From the various indicative reports like flow of credit for rural housing
under various ongoing schemes like Golden Jubilee Rural Housing Finance
Scheme, it has observed that approx. 15% of the above mentioned institutional
credit was flowing towards rural housing. Therefore, it is estimated that about
Rs.3.0 lacs crores of institutional credit would be flowing towards urban
housing during the 10th Plan period i.e. 2002-07.
Expected flow of credit during 11th Plan 2007-12:
As per the estimates the urban housing shortage at the beginning of the
11th plan period was 24.71 million units. In addition to this, it is expected that
7.27 million units would be constructed during the plan period. The total funds
required to meet the total construction of the dwelling units during the 11 th Plan
period would be around Rs. 3.61 lacs crores. In view of the current economic
and monetary scenario it is expected that the housing finance disbursals by
banks, HFCs and cooperative sector institutions would grow at a rate of about
15% per annum during the 11th plan period. Taking this into account, it is
145
estimated that the flow of credit disbursal from these institutions would be
about 7.75 lacs crores (gross flow of funds) during 2007-12 as shown in Table
(4.8.2). Assuming the flow of credit to increase to 25% for rural housing during
11th plan period, it is estimated that about Rs. 5.80 lacs crores would be the
credit flow towards urban housing.
It may be pointed out that these projected fund flow figures include
multiple counting and resale of properties, in the sense that cross-funding/ bulk
borrowing is involved among the various institutions. It is therefore, assumed
that the net flow of funds to the housing sector from formal sector institutions
would be 50% of the gross flow of funds, for construction of new houses, given
in the Table (4.8.2). This comes to approximately Rs.2.90 lacs crores, which is
80% of the total investment requirements for urban housing for the 11th Plan.
Table 4.8.2
EXPECTED FLOW OF FUNDS
Expected Total Housing Loan Disbursements (Rs. in crore)
Institutions
Commercial Banks
HFCs
Co-op. Institutions
Gross Flow of Fund Total
Housing
Gross Fund Flow for
Urban Housing
Net Fund Flow for Urban
Housing (50% of Gross
Urban Housing)
132,000
152,000
175,000
201,000
86,250
99,000
114,000
131,250
150,750
43,125
49,500
57,000
65,625
75,375
2,90,625
Net Fund Flow for Urban Housing for the 11th Plan period
Source: Report of the 11th five year plan, working group on Urban housing , Govt. of India, Ministry of
Housing and urban poverty alleviation, New Delhi.
So the total housing finance requirement for 11thfive year plan would be
361318.1 crore rupees and total fund provided form formal sector would be
290625 crore rupees only so, the total shortage would be Rs. 70693.1 crore.
146
147
ii
iii
Ibid.
iv
Ibid.
vi
vii
Bedi, H.L., Haridikar, V.K., Housing and Urban Development Corporation, Practical
Banking Advances, 9th Edition, 1997
viii
ix
xi