Transcript Ms. Christine Engstrom, Principal Investment Specialist, Asian

NHB-APUHF-APMCHUD
International Conference on Housing: An Engine for Inclusive Growth
Session IV:
Housing Challenges: International Financial Institutions’ Perspective
Christine Engstrom
Private Sector Operations Department
Asian Development Bank
New Delhi, India
April 11-12, 2013
Asia’s Acute Housing Shortages
 Large housing shortages throughout
Asia:
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India: approximately 25 million for
urban areas;
Philippines: 3.75 million shortage
from 2005-2010 (Source: HUDC); and
Indonesia: approximately 3 million
backlog with a need to add about
800,000 per annum (Source: Ministry
of Housing).
 Nearly half of all slum dwellers live in
Asia with South Asia having highest rates.
Approximately 70% of Bangladesh’s
population lives in slums.
 Continued pressure on housing. Asia is
the fastest urbanizing region in the world.
 ADB estimates that 120,000 new
residents will move to cities each day over
the next 10 years.
Asian Development Bank
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The Affordability Challenge
 Affordability is increasingly a problem in Asia impacting lower and
middle-income classes.
 Price-to-income ratios in Asia exceed those of developed countries:
 Jakarta = 14.6x;
 Dhaka = 16.7x; and
 Lahore = 23x (Source: U.N. Habitat).
 Drivers of low affordability:
 Escalation of property costs;
 Increase in costs of building materials;
 Slowing growth of wages in some markets; and
 Underdeveloped housing finance markets
high interest rates
and down payments, and transaction costs.
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Initiatives to Address Affordability Issues
India Mortgage Guarantee Corporation
 First mortgage guarantee company in India. Funded in June 2012.
 Provides guarantees against borrower default on interest and principal
payments up to a specified amount.
 Public-Private Partnership. Benefits from strong shareholders:
- National Housing Bank (38%) – Sponsor and government entity;
- Genworth Financial (36%) – Strategic investor and technical partner;
- Asian Development Bank (13%) – Investor; and
- International Finance Corporation (13%) – Investor.
 Genworth Financial is providing transition services to IMGC in areas such as risk
management, underwriting, and IT, amongst others.
 Ratings: CARE (AA+), ICRA (AA).
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Initiatives to Address Affordability Challenges
India Mortgage Guarantee Corporation
Long-term contributions to the market:
 Helping people access homes earlier.
 Addressing gaps in the housing and housing finance markets.
 Strengthening the financial sector:
 Creating new products;
 Helping banks tap new markets;
 Diversifying risk; and
 Providing capital relief.
 Supporting growth of capital markets.
 Providing data and feedback on the market to industry and
regulators.
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Initiatives to Address Affordability Challenges
Long-Term Funding and Technical Assistance
 Longer-term funding:
 Fills funding gap for banks. Capital markets are typically
underdeveloped;
 Helps banks to extend longer-tenor loans hence improving
affordability; and
 Reduces asset liability mismatches.
 Technical Assistance:
 Strengthen mortgage underwriting and servicing;
 Create new models for assessing risk from lower income/informal
borrowers;
 Better portfolio management; and
 Help banks to provide new products for broader customer
segments.
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Initiatives to Address Affordability Challenges
Microfinance
 Using microfinance institutions to
help lower income borrowers:
 Incremental building or
home improvement loans;
 Typically for existing
customers with good
repayment histories; and
 Improves affordability.
 Potential to scale-up:
 MFIs need training;
 Funding sources for MFIs
can often be limited.
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Initiatives to Address Affordability Challenges
Focus on the Fundamentals
 To address affordability issues and to support inclusive growth in the
housing markets, important to focus on the fundamentals:
 Foreclosure processes;
 Access to land;
 Efficient and effective titling and registration;
 Strong underwriting and servicing standards; and
 Industry information and transparency.
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