affordable housing – way ahead? micro housing finance corporation housing finance: the emerging...

Affordable Housing – Way Ahead?

MICRO HOUSING FINANCE CORPORATIONHousing Finance: The Emerging ContoursCAFRAL & NHB Round Table

October 7, 2011 | New Delhi Pictured: Anandgram Project, Yevat, Pune

CONTENTSOur CustomerOur ProductOur Projects

Our TechnologyCurrent Status

ChallengesPartnershipsContact Us

Pictured: Worli Village Slums, Worli, Mumbai

A Typical MHFC Customer:

• 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 CUSTOMER

Pictured: MHFC customer Badri Thakur at Fanaswadi, Mumbai

Salient Product Features:

• 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 PRODUCT

Pictured: MHFC Customer, Ibrahim Shaikh in Colaba, Mumbai

MHFC currently has an active presence in over 45 projects across

Urban India:

Mumbai

Pune

Nagpur

Surat

Ahmedabad

Indore

Kolkata

OUR LOCATIONS

OUR TECHNOLOGY

Pictured: MHFC customer Kailash Naikwade in Sadashiv Peth, Pune

High Investment in Technology:

• 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

Pictured: MHFC customer Chandrakant Kharvi in Bhayendar, Mumbai

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

• Customer Challenges

• Builder Challenges

• Policy Challenges

• Regulatory Challenges

CHALLENGES

Pictured: MHFC customer Bharat Sharma in Meghdoot Nagar, Indore

CHALLENGESAwareness & 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 pre-

approved flats on behalf of customer

Collection Mechanisms• Banks are expensive collection mechanism

options• Solution: Mobile repayments via mobile

wallets / platforms

Pictured: MHFC customer Rahul Singh in Boisar, Thane

Customer

CHALLENGESLower Construction Costs

• Functional construction design• Cost-effective construction materials• Improved use of technology• Speed of construction

Approach to LIG Housing Construction

• Project and Assembly-line approach to construction

• Land as working capital vs land as appreciating asset

• Access to project finance to create ready-for-sale units

• Reducing approval times

Pictured: Vaishnavi Sai Complex in Virar (E), Mumbai

Builder

CHALLENGES• 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 availableb) Priority Sector Definition– Current definition: < Rs. 20 lakhs– Proposal: additional benefits for

< Rs. 5 lakhs

Pictured: MHFC customer Jalinder Mhoprekar in Crawford Market, Mumbai

Regulatory

CHALLENGES• Past vs. Future Financing

Loans sanctioned based on past disbursals instead of futureSolution: disbursal milestones

• Financing TermsCurrent: based on creditworthiness of owners vs. businessSolution: based on business model & cash flows

• Develop Long Term Debt MarketsCurrent: only short term financing (5 yrs) available vs. customer repayments over 15 yrs asset liability mismatchSolution: direct access to ECBs or through the NHB

Pictured: MHFC customer Chandrakant Kharvi in Bhayendar, Mumbai

Financial

PARTNERSHIPS• Banks

- Identify customers- Service customers- Customer referrals (two-way)

• NGOs & MFIs- Share customer information- On-ground marketing / awareness

• CorporatesSpreading the word among employees that fall within our customer segment (contracutal and non-contractual)

• TelecomsCustomer databases

Pictured: MHFC customer Shankar Khatawat with his family in Yavat, Pune

Micro Housing Finance Corporation# 3 Victoria Building, 1st FloorSA Brelvi Marg, Off Horniman CircleFort, Mumbai 400001

Tel: (022) 2266 0130 or 0427Email: contact@mhfcindia.comWebsite: www.mhfcindia.com

CONTACT US

Pictured: MHFC customer Laxman Thorat in Crawford Market, Mumbai