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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 Challenges Partnerships Contact Us Pictured: Worli Village Slums, Worli, Mumbai OUR CUSTOMER A Typical MHFC Customer: Pictured: MHFC customer Badri Thakur at Fanaswadi, Mumbai • 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 OUR PRODUCT Salient Product Features: Pictured: MHFC Customer, Ibrahim Shaikh in Colaba, Mumbai • 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 OUR LOCATIONS MHFC currently has an active presence in over 45 projects across Urban India: Mumbai Pune Nagpur Surat Ahmedabad Indore Kolkata OUR TECHNOLOGY High Investment in Technology: Pictured: MHFC customer Kailash Naikwade in Sadashiv Peth, Pune • 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 CURRENT STATUS • NHB COR received in February 2009 • Capital : Rs. 36.5 crores • Commenced operations in June 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 CHALLENGES • Customer Challenges • Builder Challenges • Policy Challenges • Regulatory Challenges Pictured: MHFC customer Bharat Sharma in Meghdoot Nagar, Indore 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 preapproved flats on behalf of customer Collection Mechanisms • • Pictured: MHFC customer Rahul Singh in Boisar, Thane Banks are expensive collection mechanism options Solution: Mobile repayments via mobile wallets / platforms CHALLENGES Builder Lower Construction Costs • • • • Functional construction design Cost-effective construction materials Improved use of technology Speed of construction Approach to LIG Housing Construction • • • • Pictured: Vaishnavi Sai Complex in Virar (E), Mumbai Project and Assembly-line approach to construction Land as working capital vs land as appreciating asset Access to project finance to create readyfor-sale units Reducing approval times CHALLENGES Regulatory • • • Pictured: MHFC customer Jalinder Mhoprekar in Crawford Market, Mumbai Automatic SARFAESI clearance for all housing finance companies Long term credit guarantee Increase market 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 CHALLENGES Pictured: MHFC customer Chandrakant Kharvi in Bhayendar, Mumbai 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 PARTNERSHIPS Pictured: MHFC customer Shankar Khatawat with his family in Yavat, Pune • 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 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: [email protected] Website: www.mhfcindia.com Pictured: MHFC customer Laxman Thorat in Crawford Market, Mumbai