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1/13/2011
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Micro Housing Finance Corporation
Value for Money to Value for Many
NAREDCO 10th National Conference on Affordable HousingNew Delhi | Jan 8, 2011
Contents
Jeejamata Nagar, Lower Parel, Mumbai
• Urban Context
• Customers Stories
– Badri Thakur
– Neetu Chauhan
• Product
• Challenges
– Demand Side Challenges
– Supply Side Challenges
– Infrastructure Challenges
• Contact Information
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Urban Context
• 30% of population is urban, living on less
than 2% of the country’s land
• In Mumbai, 54% of the city’s population
lives in slums in less than 4% of its land
• India’s urban population (285 million) has
increased five fold over the past 50 years,
and is projected to keep increasing to
reach 50% of the total population in the
next 30 years
Bharatnagar Slum, Worli, Mumbai
Urban Context
The Market
• LIG housing shortfall: 25 mn units
• LIG housing market size: Rs. 5-10 tr
• Mortgage finance market size: Rs. 4-8 tr
The Social Need
• 90 % of workforce employed in informal
sector
• Monthly earnings: Rs. 5,000 to 30,000
• Excluded from mainstream housing finance
MHFC seeks to bridge this gap
through micro mortgages
A typical G+1 structure in Bharatnagar slum
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Customer Profiles
• 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 in
informal settlements
• Aspiration to own their own homes
Vegetable Vendor, Byculla Market, Mumbai
Average MHI: Rs. 16,000
Customer Stories
Badri Thakur
Age: 37 yrs
Profession: Salon Owner
Neetu Chauhan
Age: 25 yrs
Profession: Housemaid
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Badri Thakur
Badri Thakur with a client at Popular Hair Cuttng
Saloon, Cheera Bazaar, Mumbai
• Moved to Mumbai from Darbhanga
District, Bihar as a teenager
• Worked various odd jobs for several
years
• Accumulated enough capital 7 years
ago to start his own business –
Popular Hair Cutting Saloon in
Cheera Bazaar, Mumbai
Badri Thakur
Hari Om Cutting Saloon, Fanaswadi, Mumbai
• Offers various services (hair cuts,
shaves, etc.) priced between Rs. 30 to
Rs. 150.
• Monthly net income from Popular: Rs.
11,000
• Has opened 2 additional salons
following Popular’s success in Dhobi
Talao and Fanaswadi, Mumbai
• Currently employs 14 workers and
earns Rs. 30,000 (net) from all 3 salons
per month
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Badri Thakur
Badri Thakur’s previous residence adjoining
Popular Hair Saloon
• Previously lived in a 150 sq ft room
adjoining Popular with his wife,
brother and 2 children.
• Transitioned to a rental flat in
Bhayendar, with the dream of
eventually owning his own home.
• Accumulated savings to put down an
initial deposit for a flat.
• Identified a home at an affordable
price in Rashmi Star City, Naigaon
(E).
Badri Thakur
Badri’s children, Kiran (age 10) and Karan (age 7)
• Required a mortgage to finance the
purchase of his flat at Rashmi Star
City.
• Ineligible for housing finance from
mainstream banks, referred to MHFC
for a micro-mortgage by the builder.
• Sanctioned a loan by MHFC for Rs. 5.2
lakhs for 15 years
• Now a proud home owner, scheduled
to move into his new apartment in
December 2011.
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Product
• 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
Hall in 1 BHK model flat, Dreams Nivara, Pune
1 BHK @ Rs. 4.6 lakhs
1 RK @ Rs. 3.5 lakhs
2 BHK @ Rs. 5.75 to 6.75 lakhs
* all prices are approximate and subject to change
Challenges
• Demand Side Challenges
• Supply Side Challenges
• Infrastructure Challenges
Shapoorji-Pallonji “Shukho Brishti” project
construction site, Kolkata
1 BHK @ Rs. 3.9 lakhs - 2 BHK @ Rs. 6.2 lakhs
* All prices are approximate and subject to change
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Demand Side Challenges
Cost Escalation
• Appreciation of flat prices faster than
increases in customer incomes
Self Exclusion
• Ineligibility � self exclusion from seeking
housing options
Awareness
• Lack of awareness on affordable housing
options and formal housing finance
Rahul Singh, MHFC Customer, Boisar
Average MHI: Rs. 11,000
Supply Side Challenges
Limited Supply
• At right price points
• At right locations
• With good infrastructure
Asset Price Mismatch
• Functional construction design
• Cost-effective construction materials
• Improved use of technology
Reduce Project Delays
• 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 unitsVaishnavi Sai Complex, Virar (E), Mumbai
1 RK @ Rs. 5.8 to 6.2 lakhs - BHK @ Rs. 7.9 to 9.3 lakhs
* All prices are approximate and subject to change
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Infrastructure Challenges
• High tax incidence on the LIG
housing sector
• Lack of credit enhancement for
the informal sector
• Long project implementation
schedules due to multiple agencies
• Lack of long term debt markets
Reduce asset liability mismatches
Improve access to offshore markets
• Priority Sector definition
Special status for loans <Rs. 10 lakhs
BYS Security Guard, Cooperage, Mumbai
Average MHI: Rs. 11,000
Recommendations
• Government
� Tax free zones for LIG housing
� Free up land supply in logical locations
� Liberalize FSI norms for this sector
� Increased investment in infrastructure
� Single point clearance (for permissions)
� Judicious use of subsidies
� Building rental solutions
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Recommendations
• Banks
� Enable development of long term capital sources
� e.g. portfolio purchases, credit enhancements
� Share customer information
� Documentation and credit information
� Use banking infrastructure and branches for:
� Customer identification
� Pooling of savings for down-payments
� Cost effective collections (ECS)
Recommendations
• Micro Finance Institutions
� Last mile access for customer identification
� Provide credit support by sharing customer credit
information
� Assist in collections
� Risk sharing with Housing Finance Companies
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Contact
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
BUILDER CONTACT:
Ramesh Ogale (Director – Projects)
Onion-Potato vendor, Colaba market, Mumbai
Average MHI: Rs. 20,000
