Unit 5housing Finance

UNIT 5 HOUSING FINANCE
27th HOUR
Housing finance:
Housing finance is a broad topic, the concept of which can
vary across continents, regions and countries,
particularly in terms of the areas it covers.
For example, what is understood by the term housing finance
in a developed country may be very different to what is
understood by the term in a developing country.
Housing finance brings together complex and multisector issues that are driven by constantly changing local
features, such as a countrys legal environment or
culture, economic makeup, regulatory environment,
or political system
(2009) Loc Chiquier and Michael Lea, Housing Finance
Policy in Emerging Markets, p. xxx.
URBAN AND RURAL HOUSING
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Housing finance:
In addition, the concept of housing finance and housing finance
systems has been evolving over time.
Looking at definitions from the mid-1980s, we see that housing
finance was defined primarily in terms of residential
mortgage finance:
The purpose of a housing finance system is to provide the
funds which home-buyers need to purchase their
homes. This is a simple objective, and the number of ways
in which it can be achieved is limited. Notwithstanding this
basic simplicity, in a number of countries, largely as a
result of government action, very complicated housing
finance systems have been developed. However, the
essential feature of any system, that is, the ability to
channel the funds of investors to those purchasing their
homes, must remain.
(1985) Mark Boleat, National Housing Finance Systems A
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Housing finance:
However, in more recent years, a number of other much
wider definitions have appeared:
Put simply, housing finance is what allows for the
production and consumption of housing. It refers to the
money we use to build and maintain the nations
housing stock. But it also refers to the money we need to
pay for it, in the form of rents, mortgage loans and
repayments.
(2009) Peter King, Understanding Housing Finance Meeting
Needs and Making Choices, p.3.
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Housing finance:
Or simply
There is recognition of other relevant forms of housing
finance [apart from residential mortgage finance] such as
developer finance, rental finance, or microfinance
applied to housing. Developer finance is often in the
form of unregulated advance payments by buyers,
and developers sometimes provide long-term finance to
buyers through instalments sales when mortgages
markets are not accessible. Microfinance for housing is
typically used for home improvement or progressive
housing purposes. Loans are typically granted without
pledging properties. Although the overall impact of
microfinance in housing remains limited, this activity
can represent an important source of funding for
those in the informal sector.
(2009) Loc Chiquier and Michael Lea, Housing Finance
Policy in Emerging Markets, p. xxxii.
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A. What is the Housing Finance Problem?

There is more than one way to look at housing finance
and according to the viewpoint chosen significantly different
answers are given to the question of what constitutes "the"
housing finance problem.
From the viewpoint of a household the problem is the
possibility of obtaining a loan at affordable terms.
For ministry of housing officials the problem is the lack
of resources to carry out public housing programs.
From the viewpoint of ministries of finance and central
banks the problem is to prevent financial instability and
to maintain confidence in the financial system.
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A. What is the Housing Finance Problem?

National planning agencies are interested in the
contribution that housing finance can make to the
mobilization of resources and their effective use.
For the manager of a housing bank the problem is how
to expand the scope of financial services while
maintaining a viable institution.
In the case of a capital market analyst the housing
finance problem is that of mobilizing short term
resources while providing long term financing (term
transformation) in an inflationary environment; in other words,
how to generate long-term loans.
For international agencies with a mandate to make loans
which will, reach the lowest 50 percent of the
household income distribution, the problem is to develop
sustainable financial programs for low income housing.
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The Indian Housing Finance Industry

The housing is the single largest investment of an
individual. The Housing finance is growing at a rapid speed.
The major sources of finance for housing for both buyer as well
as builders have been largely from the unorganized
sector (Dangwal R C 1998), but today banks are making their
efforts to bring in formal system.
In India most of the people depend on their provident
fund and gratuity amounts received after retirement for
buying a house.
The people started relying upon the housing finance
Institutions (both banks and housing finance companies).
India has changed socially and there is no stigma
attached today to going in for borrowed funds.
The emergence of housing finance is a major business in
the country.
The housing finance institutions fulfill the shortage of
housing in India.
The demand for housing loans is rapidly increasing In
recent years.
The Indian Housing Finance Industry
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Formal and Informal Systems of Finance:

Housing Finance is an important element of housing
policies persuaded by the Governments of developed and
developing countries of the world.
In India the flow of credit into the housing sector comes
from two sources that is formal and informal sectors.
According to Dr. Rangarajan Committee Report in the year
1987, the formal sector comprises of :
Central and State Governments' budgetary allocation
General financial institution, namely LIC, GIC, and its
subsidiaries, scheduled commercial banks and Provident
Funds.
Specialized housing finance institutions like National
Housing Bank (NHB) & the HUDCO.
Apex and Cooperative finance institutions are in the
public sector while HDFC and other housing finance
companies are in the private sector. The informal sector
consists of the households themselves, public and private
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The formal financing channels like banks loans relay on
documents, and informal financing channels that largely
rely on reputation, trust and reciprocity with little legal
supervision.
The main problem of the poorer people in any country is that
they do not have access to institutional finance. It is,
therefore, necessary to find out ways in which these people
can be brought to the fold of the institutional finance.
Secondly, most of these people belong to what is commonly
known as the unorganized or informal sector.
Although India can be proud of a mature primary
market, the efforts of all HFIs and banks, including the foreign
banks, tend to be focused around the formal sector i.e., on
the employee class.
To some extent, housing loans are also being accessed by
professionals such as lawyers and doctors, but by and
large,
the
informal
sector
comprising
smaller
businessmen, traders and others has not even been
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There are a course factors that preclude the provision of
financial information by borrowers in this sector in a form
and manner required by the financial institutions and therefore,
this segment of the population look for non-institutional
credit.
Recently, a number of initiatives have been taken in India
to bring in a majority of such population to the formal
sector financial institution fold.
The reserve bank of India had set up an working group to
study the functioning of the self help groups (SHG) and
Non-Governmental Organization (NGOs) for expanding
their activities and deepening their role, linking of SHGs with
banks, capacity building of NGOs, etc.
Similarly, the emergence of microfinance sector is also of
recent origin in India.
A few community based financial institutions (CFIs)
also emerged. While initially, all these institutions provided
RURAL HOUSING
funds to the peopleURBAN
to setAND
up income
generation activities, over
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While the exact number of micro financing institutions in the
country has not been ascertained, it has been estimated that
there could be 250-300 voluntary agencies in micro-finance
each with 50-100 SHGs.
NHB has formulated a refinance scheme for the loans
advanced by the housing finance companies to the
community based finance institutions.
Six projects involving a linkage between CFIs and
housing finance companies were identified under the technical
assistance programme from Asian Development Bank to
improve the understanding of the informal sector lending
for housing as well as the willingness on the part of the formal
and informal institutions to provide affordable credit to urban
and rural poor.
Of the six projects, two are well underway with the
disbursal of the first tranche of the loan amounting to
Rs. 6.6 million disbursed to about 200 beneficiaries.
Sanction letters have been issued in respect of
another two projects.
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Some major institutional concerns and operational
problems have emerged from this experience.
Some of these relate to the
rate of interest,
security for the loan,
selection of borrowers and credit appraisal,
loan processing fee,
end use of funds,
organizational problems at the SHG
level like the capacity to manage long term loans, etc. these
are being analyzed to find out a solution before the
same could be replicated elsewhere in the country.
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Institutions providing Housing Finance:

In India, the following types of institutions provide long term
finance for housing:
1. Commercial banks,
2. Cooperative banks,
3. Regional rural banks,
4. Agriculture and rural development banks,
5. Housing finance companies and
6. Cooperative housing finance societies.
. The Housing finance sector in India has no doubt,
experienced unprecedented change in its structure
from its formulation stage.
. Indian Housing finance has far moved from the stages of
being a solely government provided service during
the 1970s to a very competitive sector with more than 45
housing finance entities providing housing loans
worth Rs 781,000 million to home buyers across India.
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Commercial banks:
The largest mobiliser of savings in the country.
However, in the past, the savings mobilized were not
being ploughed back to the households for shelter
purposes.
The reluctance on the part of the banks to extend credit for
housing as a regular part of their business was basically
due to their perceived role as being limited to
financing of working capital needs of commerce,
industry and trade.
Yet another factor was that the banks did not want to
tie up their short-term resources in extending longterm housing loans.
However, after the nationalization of some of the
banks in 1969, the banks became more responsive to
the social needs of the community.
Co-operative banks:
The state co-operative banks are the apex level institutions
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Agricultural and Rural Development Banks:
They
are
term
lending
institutions
operating
exclusively in the rural sector.
Housing finance was not originally within the ambit of
their functions.
Following the thrust given to the housing sector in the late
eighties and more particularly after the establishment
of NHB, several states have amended their respective
acts to enable these institutions to lend for housing in the
rural areas.
Housing Finance Companies:
the housing finance companies are basically non-banking
financial companies.
A non-banking financial company is classified as an housing
finance company if providing housing finance is the
principal object of the company or where there are more
than one principal object as per the Memorandum and Articles
of Association, housing finance should form a major share
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Housing Finance Companies:
To be eligible for approval for availing refinance facility
from NHB, a minimum of 75% of the capital employed
should have been by way of long-term finance for housing.
Co-operative Housing:
The other set of specialized housing finance
institutions are the co-operative housing finance
societies.
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The housing finance revolution in India can be divided

into five distinct phases:
First Phase:
The first phase began before 1970 when the sole provider
of any house building support was the government of India
through its various social schemes for public housing.
The government implemented these schemes through
state housing boards which were responsible for allocating
serviced land and houses to individuals based on social equity
principles.
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Second Phase:
The second phase starts with the establishment of the
public
housing
company,
Housing
and
Urban
Development Corporation (HUDCO).
HUDCO was created to assist and promote housing
and urban development programs with government agency.
HUDCO still plays an important role in implementing
government initiatives such as the Valmiki Ambedkar Awas
Yojna, was launched by Govt. Of India in 2001-02 to
provide shelter or upgrade the existing shelter for people
living below poverty line in urban slums.
Another
important
private
player,
Housing
development finance Company HDFC, was created in
1977.
HDFC pioneered in individual lending based on market
principles.
HDFC today, is one of the largest home loan providers
of the country andURBAN
its success
displayed
that financing homes
AND RURAL
HOUSING
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Third Phase:
The third phase covers the decade of 1980, which is
marked by the establishment of the countrys housing
finance regulator- National Housing Bank in 1987.
The era also saw government involvement in directing various
agencies
like
insurance
companies,
commercial
banks( Under priority lending requirements which
allowed banks to allocate 1.5% of their incremental
deposits to housing under RBI guidelines.), provident
funds and mutual funds to invest part of their increment
sources on housing.
The public sector insurance companies Life Insurance
Corporation of India (LIC) and General Insurance
Corporation of India (GIC) were also mandated to
support housing finance activities, both directly through
their housing subsidiaries (both established in 1989) and
URBAN
AND RURAL
HOUSINGto invest a certain
indirectly through a
mandated
requirement
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Commercial banks:
Later, the commercial banks are asked to earmark a
minimum of 3% of their incremental deposits for
extending to the housing sector during the late 90s.
During the year 1999-2000, this works out to Rs. 36,000
million.
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Fourth Phase:
The fourth phase is the era after liberalization and is
characterized by dramatic changes in pricing of loans.
Before 1994, the pricing of home loans were regulated by
the NHB based on a differential rates charged according to
the size of the loan.
This policy was amended in 1994 and providers were free to
charge market rates for loans above Rs 25000.
The fourth phase saw a dominance of fixed interest rates,
but variable rate offers started emerging at the end of
the decade.
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Fourth Phase:
Towards the end of the 1990s, against the backdrop of
lower interest rates, industrial slowdown, sluggish
credit off-take and ample liquidity, and financial
deregulation commercial banks shifted their focus from the
wholesale segment to retail portfolios.
The lower interest rate regime, rising disposable
incomes, stable property prices and fiscal incentives
made housing finance attractive business.
Further, housing finance traditionally has been characterized
by low nonperforming assets (NPAs) and given the vast
demand for housing loans, almost all the major
commercial banks plunged into the business of housing
finance.
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Fifth Phase:
The fifth Phase of rapid growth in the sector started
after the millennium.
Home loan disbursements rapidly grew during the first
few years of this phase.
The lower interest rate regime, rising disposable
incomes, stable property prices and fiscal incentives
made housing finance attractive business.
Home loan disbursements grew to Rs 768191.90 million in
2005 from Rs 147012.00 million in 2001.
The year 2003 witnessed an annual growth rate of 76%
in loan disbursements.
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Fifth Phase
With the growth and profitability in housing finance
evident, commercial banks gave more impetus to this sector,
aggressively increasing their market share.
Banks overtook housing finance companies in the
market capturing 72% of the market in 2006 from a
previous share of 27% at the beginning of this phase in
2001.
The latter part of this phase witnessed a slowdown in the
rate of growth in home loan disbursements.
High lending rates coupled with high property prices
led to a slowdown in housing loan demand.
The growth rate reduced to 5.46% in 2006 slowing
drastically from the rates of 41.5% in the previous year.
The recession in 2008 and the consequent correction
in house prices are expected to reduce the size of
disbursements in 2009 by 1%.
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into five distinct phases: (concluding remarks)
The Housing finance sector in India has no doubt,
experienced unprecedented change in its structure
from its formulation stage.
The structure of the Indian housing finance market
rapidly changed with the arrival of commercial banks in the
late nineties. (including foreign banks)
These banks with their aggressive marketing and pricing
strategies have now overtaken the housing finance
companies.
With the liberalisation of the housing finance sector and
developments like the introduction of mortgage backed
securities in the markets, we are increasingly moving
towards the market structures which exist in the more
mature markets.
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The housing finance revolution Asia Specific

Economies:
During the last one decade, Asia Pacific economies have
made significant progress in developing private housing
market and market based systems for financing home
purchases.
Government sponsored housing finance strategies have
become more and more non-viable due to budget
constraints.
Post 1997, Asian financial crisis, the respective Governments
in Asia stepped up their effort to improve the structure
of the housing finance system.
Many countries even in other parts of the globe have
experienced the waves of financial liberalization and
deregulation.
House prices have increased in most industrialized and
emerging economics and in many countries housing debt per
URBANhave
AND RURAL
HOUSING
capita and house prices
reached
new all-time highs (BIS,
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The housing finance revolution Asia Specific

Economies:
The key factors triggering the progressive growth on the
demand side are declining interest rates over a period
of years, rapid increasing in income levels, tax benefits
extended to borrowers whereas from the supply side the
emerging competition in the housing finance sector
between lenders, an increasing number of new entrants
to the housing finance market, the introduction of several
new products by lending institutions to meet the needs of a
wide variety of customers and increasing collaboration
between lending institutions and housing developers.
Introduction of home loans at floating rates become
popular among borrowers in Asian countries especially
in India, China and Sri Lanka as the perception among the
borrowers is that they could enjoy lower short-term rate
which is comparatively less than long-term fixed rate
(Piayasiri, 2006).
Housing Affordability in relation with demographic,

social and economic status:
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It is evident from the above table that one in every three

Indians is under the age of 15, and only one in three is
older than 35.
When comparing with other countries such as China, USA
and Japan, India have the unique advantage of the
higher level of middle aged and lower level of aged people.

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Indian GDP has grown at 6% for the past 10 years
and 8% for the last 3 years and interestingly service
sector accounts for 60% of GDP (Parekh, D, 2006).
It could be seen from the above table that in spite of the
merits highlighted in the preceding paragraphs, house
mortgage as a percentage of GDP, India stands the
lowest.
Amongst the Asian countries, Hong Kong is the topper,
followed by Taiwan, Malaysia, Thailand and Korea.

It could be inferred
from the above exhibit
that the consumption
pattern in amongst
Indian population is
expected to change
as indicated above by
2013.
The strivers are less
but aspirers and rich
are significant higher
comparing to the 2003
status.
The housing finance
sector in India has
undergone
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The existing housing finance

system
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The transition of existing housing finance

system
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Survey Findings:
For the purpose of knowing more about the housing finance
market in India, the centre (Indu Center for Real Estate
and Infrastructure) conducted a survey across 17 major
housing finance Institutions in India.
These institutions represent more than 90% of the market
share; hence we believe that the results obtained are very
insightful.
The survey intended to capture the scale of demand for
home loan products, the products and incentives offered
to customers, target customer base, government
policies and support in place, and sentiments on the
current market conditions and future prospects.

Survey Findings:
Interest Rates:
Unlike
other
countries,
floating
rate
mortgages
constitute
80%
of
the
market share in India.
All institutions surveyed said
that Variable interest rates are
more popular in their banks.
This is mainly because
finance providers in India
incentivize
floating
rate
loans by keeping a huge
spread
(sometimes
275
bps) between fixed rate and
floating rate loans.
The average interest rates
varied from 8- 15%.
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Loan tenure:
The survey showed that most
banks offered loan tenure of
20 years.
The costumers chose to
take a shorter tenure.
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Loan to value ratio:
Even though banks offer a loan which is 75- 80% of the
value, most consumers prefer taking a loan for half the
value of the house.
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Borrower profile:
The survey showed that most consumers belong to the
age group of 35-40 years.
The average income group of the borrower is seen to be
around 4.2 lakhs per annum.
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The importance of the housing sector in India can be
judged by the estimate that for every Indian rupee (INR)
invested in the construction of houses, INR 0.78 is added
to the gross domestic product of the country and the real estate
sector is subservient to the development of 269 other
industries.
The real estate sector is also the
employment generator in the country.
second
largest
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Direct and Indirect Incentives for Housing Development

Incentives may be broadly defined, as in everything that
motivates or stimulates people to act (Giger 1996).
McNeely (1988) also makes the useful distinction between
incentives, disincentives and perverse incentives. In contrast to
incentives,
which
we
have
described
above,
disincentives are purposely designed to discourage
particular behaviours and can include taxes, fines and
various other penalties or moral suasion.
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Tax Incentives by the government:
Tax sops given by the government for housing loans have been
instrumental in driving growth in this sector. The
government allows tax benefits to both the home loan
consumer and the lender.
A home loan consumer is allowed tax deductions on the
following:
Interest paid on home loan: As per Sec 24 (b) of the
Income Tax Act, 1961, annual interest payments up to Rs
1,50,000 on housing loans can be claimed as a deduction from
taxable income.
Principal repayment of home loan: As per Sections 80 C
read with section 80 CCE of the Income Tax Act, 1961 principal
repayment up to Rs 1,00,000 on home loan is allowed as a
deduction from gross total income.
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Tax Incentives by the government:
The lender is also allowed tax deduction:
Under Section 36 (1) (viii) of the Indian Income Tax Act 1961,
with respect to any special reserve created and maintained
by a financial corporation engaged in providing long-term
finance for construction or purchase of houses in India for
residential purposes, a maximum amount of 20 per cent
(earlier it was 40 per cent) of the profits derived from
such business (computed under the head profits and
gains of business or profession) and carried to such
special reserve is tax deductible.
This deduction is available only up to twice the total
amount of the companys paid-up share capital and
its general reserves.
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Financing agencies and their Terms of Lending:

NHB:
NHB is of the opinion that intervention through
institutional credit can be made more effective by adoption
of different approaches to cater to the needs of different
income groups.
The households above the average income could well be
served by institutions which raises resources through the
open market and deliver credit with minimum necessary
prudential regulations by the regulator.
For the households below the poverty line, the
institutional credit will have to take into account the
employment and poverty alleviation programmes having
an element of subsidy.
It is the middle group which constitutes nearly half the
total number of households that needs to be taken care
of.
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NHB:
National Housing Bank (NHB), a wholly owned subsidiary
of Reserve Bank of India (RBI), was set up by an Act of
Parliament in 1987.
NHB is an apex financial institution for housing.
It commenced its operations in 9th July 1988.
NHB has been established with an objective to operate as
a principal agency to promote housing finance
institutions both at local and regional levels and to provide
financial and other support incidental to such institutions and
for matters connected therewith.
NHB registers, regulates and supervises Housing
Finance Company (HFCs), keeps surveillance through On-site
& Off-site Mechanisms and co-ordinates with other Regulators
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NHB:
Activities of National Housing Bank:
Broadly, the activities of the National Housing Bank can be
divided into the following three major sub-heads:
a. Regulation and Supervision:
. NHB exercises regulatory and supervisory authority
over the Housing Finance Companies (HFCs).
. These Companies are required to obtain Certificate of
Registration
(CoR)
from
NHB
for
commencing/carrying on the business of a housing
finance institution under Section 29 A of the NHB Act; and
are required to comply with Directions, Guidelines and other
directives issued by NHB.
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NHB:
b. Promotion and Development:
NHB operates as the apex Development Finance
Institution (DFI) for the housing sector.
The policies of NHB are directed towards promotion and
development of housing finance institutions and the sector in
general.
The development of human resources is sought through
training programmes, seminars and symposia on matters
related to housing for the officials of the Housing Finance
Companies (HFCs), Commercial Banks and Public Housing
Agencies.
Besides, NHB has taken up a number of Research Studies
to facilitate development of sector on sound and healthy
lines.
The Bank has also launched NHB Residex; a price index for
URBAN
AND
RURAL
HOUSING
residential properties
in six
cities
to begin
with; and the same is
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NHB:
c. Financing:
NHB raises resources for deployment towards increasing
new housing stock and provides housing refinance to a large
set of retail institutions.
These include eligible scheduled commercial banks,
scheduled state cooperative banks, scheduled urban
cooperative
banks,
specialized
housing
finance
institutions, apex cooperative housing finance societies and
agriculture and rural development banks.
In addition, the Bank has also extended financial support
to the housing schemes formulated by Public Housing
Agencies.
Non Government Organisations (NGOs) and Micro
URBAN (MFIs)
AND RURAL
HOUSING
Finance Institutions
are
also considered for
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NHB:
NHB has been established to achieve, inter alia, the
following objectives
To promote a sound, healthy, viable and cost effective
housing finance system to cater to all segments of the
population and to integrate the housing finance system
with the overall financial system.
To promote a network of dedicated housing finance
institutions to adequately serve various regions and different
income groups.
To augment resources for the sector and channelize
them for housing.
To make housing credit more affordable.
To regulate the activities of housing finance companies
based on regulatory and supervisory authority derived under
the Act.
To encourage augmentation of supply of buildable land
AND RURAL
HOUSINGand to upgrade the
and also buildingURBAN
materials
for housing
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Types of Housing Loans (General):
Most of the institutions offer a standard fixed or floating
rate mortgage to the prospective borrowers.
Usually, the housing loan can be repaid over a maximum
period of 10, 15 or 20 years.
Repayment does not extend beyond the retirement age
of a person (60 years) if employed or 65 years of age if self
employed.
Repayment of the loan is done through the equated
monthly installment method.
In case of borrowers expecting a reasonable growth in
their future income, installments can be on graduated
basis.
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Besides, interest rate, the borrower also has to meet
certain other costs viz. interest tax, processing fee and
administration fee.
The lender is required to pay a tax to the government
on his interest income at the rate of 2% per annum.
The lenders usually pass on this tax burden to the
borrower.
The banks and the housing finance companies also levy a
fee for processing the application and it varies between
0.5% to 1% of the loan amount.
Besides they also charge what is known
administration fee of 1% of the loan amount.
as
an
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The interest rate on housing loan offered by the
housing finance companies has been falling in the
recent years and it is now the lowest.
In respect of the banking system, the reserve bank of India
has given the freedom to commercial banks prime
lending rates which is in the range of 12.5 to 13% per annum.
Since the cost of funds to the banking system is lower
than the cost of funds to the specialized institutions,
their interest rates are comparatively lower than the rates
charged by the specialized housing finance institutions.
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The major players in the Indian housing finance market

are the following:
As described earlier, in the current market structure,
commercial banks outsize the HFCs in market share.
Banks overtook housing finance companies in the
market capturing 72% of the market in 2006 from a
previous share of 27% at the beginning of this phase in
2001.
Over the last few years, the share of housing finance
companies (HFCs) has increased in the industry on
account of robust disbursements growth, supported by
greater presence in urban centres and increasing loan size,
along with stable asset quality.
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are the following:
HDFC:
Housing Development Finance Corporation Limited
(HDFC) was incorporated in 1977 as Indias first specialised
housing finance institution.
It also offers property-related services and deposit
products.
HDFC has a diversified and stable resource base
comprising fixed deposits, bank borrowings, debentures,
bonds, securitisation, and foreign currency borrowings.
Deposits constituted around 23 per cent of its total
borrowings as of March 2009.
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are the following:
HDFC:
HDFCs disbursements and outstanding loans posted a CAGR
of 25.6 per cent and 24.6 per cent, respectively, between
2003-04 and 2008-09.
Total disbursements during 2008- 09 were Rs 396.5 billion
against Rs 328.7 billion in the previous year,
representing a growth of 20.6 per cent.
HDFCs outstanding loans rose to Rs 838.6 billion from Rs
730 billion in the previous year, representing a growth
of 14.9 per cent.
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29th HOUR

are the following:
LICHFL:
LIC Housing Finance Limited (LICHFL) was incorporated in
1989.
The company was listed in 1994.
The company mainly provides housing loans, where it
provides long-term finance to individuals for purchase /
construction / repair and renovation of new / existing
flats / houses.
In 2008-09, it disbursed loans to the tune of Rs 87.6 billion,
a growth of almost 24 per cent over 2007- 08.
It is listed on the BSE, NSE and the Luxembourg Stock
Exchange.
29th HOUR

The major players in the Indian housing finance
market are the following:
GIC Housing Finance Limited:
GIC Housing Finance Limited (GICHFL) was incorporated in
1989 as 'GIC Grih Vitta Limited', with the objective of
providing shelter to all in view of the governments national
housing policy.
The primary business of GICHFL is granting housing
loans to individuals and to persons/entities engaged in
construction of houses/flats for residential purposes.
GICHFLs disbursements recorded a CAGR of 6 per cent,
while outstanding loans posted a CAGR of 18.9 per cent
between 2003-04 and 2008-09.
29th HOUR

are the following:
Can Fin Homes Limited:
Can Fin Homes Limited (CFHL) was promoted in 1987 by
Canara Bank in association with financial institutions,
including HDFC and UTI.
CFHL is the first bank-sponsored housing finance
company in India.
The company also diversified by launching non-housing
finance products like premises loan for practising
professionals (venture), mortgage loans (net worth) and loan
against rent receivables.
CFHLs disbursements registered a negative CAGR of 5.1
per cent, while outstanding loans recorded a CAGR of
9.7 per cent between 2003-04 and 2008-09.
URBAN AND
RURAL
HOUSINGyear,
However, as compared
to the
previous
27th HOUR
It was in the year 1970 when Housing and Urban Development

Corporation (HUDCO) was established to finance various housing
and urban infrastructure activities. However, the Housing
Development Finance Corporation (HDFC) was the India's first
private sector housing finance company came into existence in
1977. Since then, the housing finance in India has been flying high.
It's expected to grow at a growth rate of 36% in the coming years.
As the commercial banks started expanding housing-related
disbursements, the market share also started growing up. In 2000,
the Indian housing finance companies accounted for 70 per cent of
the disbursements, while their collective share decreased to 36 per
cent within 5 years. In 2005, banks accounted for 64 per cent of the
disbursements.

Unit 5housing Finance

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UNIT 5 HOUSING FINANCE

URBAN AND RURAL HOUSING