House Finance Companies

Presented By: Ankit Keshre Avinash Ankit Harshit Garg Makrand Singh Tomar Prasun Shome Ratnesh Singh Sameera Khan

The Introduction
Housing Finance Concept was brought by HDFC in 1977 The housing mortgage market which stood at over $6 billion in 2001 is today estimated at a mammoth $18 billion. The mortgage market is mushrooming by a hefty average growth rate of 30-40% on an annual basis. In 2003-04, it touched growth rate of 73% p.a. Interest rates on housing loans have fallen from a peak of 17% in 1996 to 7.5% in 2004 making owning a home more affordable.

Combined with increasing loan tenures, increasing loan-tovalue ratio and a rise in the instalment-to-income ratio are precipitating high growth rates in the housing finance market.

Market Size
Each year some 4.7 million housing units would have to be completed up to 2030. The total number of houses that would be required cumulatively during the Tenth Plan period (2002-2007) is estimated at 22.44 million dwelling units. The Tenth Five Year Plan has estimated an outlay of INR 7,263 billion to the housing sector. Total fund required in 11th Plan is Rs.10 lakh crore India requires 26,300 housing units per day during the years 2007-12 to mitigate the housing requirements. NHB has estimated additional housing requirement of 45m. During 2005-06 housing loan disbursements aggregated Rs.86,034 crore of which Rs.58,623 crore (68%) accounted for by SCBs.

Outstanding Mortgage Debt (Rs.2,72,558 crore for Banks & & HFCs) represents 8.5% of the country's GDP.

Key Players in the Mortgage Market

Banks Key Players Housing Finance Companies (HFCs) National Housing Bank

Reserve Bank of India

Regulator

Access to low cost funds via current/saving accounts Extensive branch network
High operating costs Mandated priority sector requirements, maintenance of cash reserve ratio & high statutory liquidity ratio

Advantages

Dedicated players, better customer service Lower operating costs

Disadvantages Smaller branch network Higher capital adequacy ratio

Growth Trend

The Indian housing finance industry has grown by leaps and bounds in past few years.

It is growing at an estimated rate of 28 to 30%.

Total home loan disbursements by Banks and Housing Finance Companies (HFCs) has risen from Rs.29359.29 crores in 2001-02 to Rs. 51672.7 crores in 2002-03 witnessing a phenomenal growth of 76% during this period.

Tax benefits and other fiscal incentives announced in the Union Budgets
Increase in disposable income levels due to decrease in marginal tax rates and increase in total income levels

Housing Finance Scenario

Mortgages as a % of GDP

Housing Finance Outlook

According to a study made by CRIS INFAC, the total housing stock (both new and used) that can be financed is expected to be more than 50 lakh units in FY09 from an estimated 33 lakh in FY04. Housing finance portfolio is expected to grow from about Rs. 1,34,500 crore in FY05 to about Rs. 5,08,300 crore in FY09 at a CAGR of 30.5%.

Key Issues

Building an inclusive housing finance system Innovation and Product Development Market Infrastructure Informal Sector Growing NPA Other issues

The Process

Documentation

Credit appraisal and loan sanction Legalities: Property and papers Technical / Valuation check Registration: Sealing the deal Signing the Home Loan Agreement Processing of the loan Disbursement Equitable mortgage

Thank You