PRESENTATION ON HOUSING FINANCE

PRESENTED BY: VARUN JAIN IQBAL SINGH

HOUSING FINANCE
Shelter being one of the three basic human needs, every human being aspires to own a home. The basic objective of the UN Conference on Environment and Development, 1991, is to achieve adequate shelter for all, especially the deprived urban & rural poor, through an enabling approach to the development & improvement of shelter that is environmentally sound. The concept of Housing Finance was pioneered by Housing Development Finance Corporation (HDFC) in October 1977. HDFC is the market leader with 21% share in the housing finance market. It was not only a trend-shelter for housing finance in whole Asian continent, but also built up the industry by setting rules, policies & procedures to protect the interests of customers.

Housing Finance is a business of financial intermediation wherein the money raised through various sources such as public deposits(acc. To NHB), institutional borrowing(from banks), refinance from NHB and their own capital, is lent to borrowers for purchasing house. These intermediaries lend money by accepting mortgage by deposit of title deeds of residential property. The players in this industry continue to be housingfinance companies (HFCs) and commercial (local as well as foreign) banks.

Role of Housing Finance in Economy

Housing Finance is one of the Top Employment generators for economy. Its helps to boost in the whole economy through generation of demand(housing). It has linkages with over 250 industries, including such core industries like cement, steel, timber, tiles etc.

Measures related to Housing Sector in India

The National Housing and Habitat policy(NHHP) was formulated in 1998 and stressed on :
Removing legal, financial & administrative barriers for facilitating access to loans, finance & technology.

Providing quality and cost-effective shelters, especially to poor peoples.

The National Urban Housing & Habitat Policy, 2007, while focusing on urban shelters, to meet the revenue requirements of urban housing & infrastructure using innovative tools.

 To improve the habitat conditions in the rural areas, various rural housing like: Rajiv Awas Yojana(2010-2015): make the country slum free. Indira Awas Yojana(1985-86) Jawahar Rozgar Yojana(1989) Golden Jubilee Rural Housing Finance(1997-1998): to provided improved living conditions to rural areas. Bharat Nirman: construction of 60lakh houses in rural areas. Rural Housing Fund : a sum of rs. 2200 crore has been allocated from the short falling of commercial banks.

Housing Finance Institutions(HFIs) There are different types of institutions for housing in Urban & rural areas. They are: Scheduled Commercial Banks Scheduled cooperative banks(district cooperative banks & urban cooperative banks) Regional Rural Banks Agriculture and Rural Development banks Housing Finance Companies National Cooperative Housing Federation of India

Types of Housing Loans Home equity loan: finance to customers by way of mortgage of existing property to financier for taking a loan for some other purpose. Home-extension loans: is extension of the existing houses like addition of rooms, toilet facilities and so on. Home-improvement loans: these loans are provided mainly for repairs and maintenance of existing house. Home-Purchase loans Land purchase loans Loan to NRIs

The loan amount generally depends on: The period for which the loan is needed The repayment capacity of the borrower The estimated value of property Deeds of borrower The rate of Interest on these loans depends on a number of factors, such as tenure of loan, loan amount, purpose of loan, repayment capacity of borrowers & the cost of fund of the financier.

NATIONAL HOUSING BANK

NATIONAL HOUSING BANK ( NHB )

NHB was established on July 9 1988 under the NHB Act 1987 . NHB is fully owned subsidiary of RBI. The main office of NHB is in Delhi.
NHB is apex level financial institution for housing sector. It was setup to organise the sector of Housing finance in the country . Its basic functions were to operate as a principal agency to promote housing finance institutions (HFIs) at both local and regional levels and to provide financial and other support to them. . HFIs include those institutions which have one of their principal object of their business of providing finance for housing purpose . Institution might be incorporated or not.

The National Bank is a body corporate. It can establish offices/branches /agencies at any place in India and with the RBI's approval outside India. Its Authorized and paid-up capital is Rs 350 crore, which is fully subscribed the RBI. The authorized capital can be increased up to Rs 2,000 crore by the Government with the RBI approval .

OBJECTIVES OF NHB
To promote sound and cost-effective housing system by amalgamating the housing finance system with the overall financial system. To encourage a network of dedicated housing finance institutions (HFIs) to adequately serve different income groups.

To extend resources for the real state sector, channelizing them further to housing.

To make housing finance/home loans affordable and within the means of common man.
To regulate the activities of housing finance companies (HFIs) based on regulatory and authority provided under the Act. To increase the supply of housing property and building materials, thereby upgrading the housing stock in the country.

ROLE OF NHB IN HOUSING FINANCE

REGULATIONS AND SUPERVISION OF HFCs : NHB

regulates the housing finance sector under the provision of NHB act 1987 to prevent the affairs of any HFIs conducted in a manner which is likely to cause harm to depositor .For this purpose NHB has given directions to HFIs and their auditors . Beside this NHB has also set guidelines for Asset liability management , deposit acceptance activities and prudential norms relating to capital adequacy ,asset qualification and provisioning for bad and doubtful debts.

PROJECT LENDING : The National Housing Bank provides

financial assistance for project lending to a range of borrowers both in the public and private sector. The eligible agencies for lending are:

Public Agencies :
State Housing Boards/Improvement Trusts State Slum Clearance Boards/Authorities Municipal Corporations/Councils New Town Development Agencies Local Authorities for Housing & Urban Development

Private sector institutions :

Microfinance Institutions/Self Help Groups/NGOs/Societies registered under the Societies Act, 1860 .
Financing Varies between 65 to 100 % of the project cost for a maximum of 15 years

REFINANCING : HFIs provide loans to individual , builder , corporate house and so on for construction , purchase or repair of the house .With the objective that providing long term funds to these institutions and individual ( builder , corporate house) by HFIs NHB extend refinance in respect of loan to them.

NHB Provides refinance to Special HFIs , Rural development Bank , scheduled state cooperative bank and so on.
Refinance for Rural housing is provided at concessional rate of 8% per annum for 7 years.
Paying off an existing loan with the proceeds from a new loan, usually of the same size, and using the same property as collateral.

Promotion and Development Function : NHB frames

reviews and modify guidelines for HFCs for their sound and healthy growth .All HFCs registered with the NHB under the Act NHB 1987 are eligible for refinance support.

POWERS OF NHB UNDER THE ACT NHB 1987

Promoting, supporting in the establishment of housing financing institutions ( HFIs)
Issue directions to HFIs to ensure their sound growth.

Making of loans and advances and financial assistance for housing activities to HFIs, banks, state cooperative, agricultural and rural development banks .

Organizing training programmes/seminars on matters relating to housing Formulating scheme for the economically weaker sections of society . Undertaking research and surveys on construction techniques and other studies relating to housing . Providing technical/administrative assistance to HFIs .

THANK YOU