panel 5-r.v. verma.ppt
TRANSCRIPT
Panel 5: The Politics and Economics Panel 5: The Politics and Economics
of Land and Housing (March 24, of Land and Housing (March 24, 2011)2011)
R. V. VermaNational Housing Bank
India
The 21st Century Indian City-Developing an Agenda for Urbanization in
IndiaMarch 23-25, 2011
2
• Steady growth
• Served by specialised HFCs & Commercial Banks - synergies
• Proactive and Risk based Regulation
• Conservative lending practices; Originate to hold
• NPAs well contained
• Shift from high-end market to Affordable housing
• Market segmentation – diversified risk
• Broad based stakeholding – induces stability
Indian Mortgage Indian Mortgage MarketMarket
Fiscal and
Credit Policy
Support
FinancialMarket
HousingMarket
Affordability
Banks
Financial Sector
CapitalMarket
Real Sector
PublicAgencies
PrivateDevelope
rs
MFIs
Housing Finance MarketHousing Finance Market
3
HFCs
Land &
Construction
Infrastructure
Informal Sector
NHB
4
Outstanding Housing Outstanding Housing LoansLoans
5
Trends in Housing Finance Trends in Housing Finance
Disbursals (INR in billion)
• Housing Loans outstanding 7.9% of GDP
• Supportive Regulatory/Fiscal Policies
• Financial Deepening
• Supply Responses: Demand Driven
• Main beneficiaries - salaried class, professionals and tax payers
• Challenge for Low Income Housing – “Accessibility” and “Affordability”
6
Trends in Housing Trends in Housing Finance Finance
7
• Financial Sector and Capital Markets - Development
• Interest rates deregulation
• Growing Disintermediation
• Shift towards Market Oriented Resource Mobilisaiton
• Level Playing Environment
• Market Determined Cost
Bearing on Affordability Availability Accessibility
Financial Environment Financial Environment
• Rapid growth in housing sector has bypassed Low-Income Households
• Demand Identification
• Risk Perception
• Price Rise, Interest Rates - Impact on Low Income Housing
• Market/Subsidy based Approach8
Issues in Low Income Issues in Low Income Housing Housing
• Limited access to housing credits
• Cannot contract debts on terms of the financial market
• Unstable income and unstable cash flows
• High risk & high cost - to - service customers
• Role of Guarantee/Risk Fund
• Role of Government & Financing Institutions in Market Environment
• Leveraging effect of Subsidy 9
Issues in FinancingIssues in Financing
• Competing Demand on Land and Finance• Land supply is constrained:
Land availability Land use rules
• Efficient use of Land • Title and Tenure • Finance Flow Constrained
Stability Growth Risk Perception
Need for ‘Integrated Approach’ 10
Supply Constraints Supply Constraints
Real Sector • Land Supply
• Cost of Land
• Land market functioning
• Infrastructure provision
• Construction & Delivery
• Role of Public & Private Sector
Role of Incentives Subsidized Housing Credit Subsidized House Prices
Financial Sector
• Project Finance
• Individual Loans
• Supply of Funds
• Cost of Funds
• Whether market based solution?
11
Affordability IssuesAffordability Issues
Supply Side• Land Acquisition• Infrastructure Provision• Sale of Land• Housing Construction• Housing Sale• Role of Public Agencies/
Developers • Credit Delivery
Demand Side• Purchase Price• Income Level• Affordability• Loan eligibility• Subsidy component• Risk Mitigation• Role of NGOs/MFIs• Demand Aggregation
Ensuring access to housing with infrastructure at affordable prices
12
In Other WordsIn Other Words
• Formal sector accounts for only 25% of the total investments in housing; skewed distribution of credit
• Affordability and security; perceived higher risk
• Financial assistance through informal sector at nascent stage
• Subsidized housing programmes: limitations
• Targeting and sustainability of such programmes13
ChallengesChallenges
• Market’s limitations / Subsidy Limitation
• Private Capital and Public Objective
• Formal & informal sectors compartmentalized
• Demand aggregation, demand registration, intermediation and risk mitigation
• Incentives for Savings
• Policy Reforms14
ChallengesChallenges
• Not enough supply at lower prices. Impact of lowering prices on the stock of housing, the flow of housing and housing finance
• Price – Supply relationship. Profit on Value or Volume Profitability to excite the suppliers/builders. Price/cost structure
• Demand sensitive to price but supply not forthcoming
• Measures to convert the investor’s market into consumer’s market 15
Where is the Disconnect?Where is the Disconnect?
• Partnership Approach : Public/Private/Community
• Innovative instruments for benefit of All
• Incentives for Low Income Housing Credit
• Demand led
• Incentives for Low Income Housing Construction
16
Search for Synergies Search for Synergies
Central
Government
State/Local
Governments Financial
Institutions
PUBLIC PRIVATE
Partnership
RealSector
Financial Sector
Formal
Sector
InformalSector
Facilitator
& Enabler
Policy &
Programmes
Policy &
Programmes
Instns &
Products
Affordable Housing for All and Financial Inclusion
–Mutually Consistent Themes17
Sector Profile – Wide Sector Profile – Wide StakeholdingStakeholding
18
• Government Support
Liquidity
Pricing
Risk Mitigation
Targeting - Low Income Housing
• Guarantee Fund / Subsidy
Subsidy support to EWS/LIG housing
Leverage institutional finance
Institutional SupportInstitutional Support
GOVERNMENT INTERVENTION
The Government could consider enabling legal and regulatory reforms and create an enabling environment
through efficient functioning of the land market
Streamlining of all approval processes
provision of efficient infrastructure
e-governance viz. introducing electronic record for land and bringing in more transparency in the record of land and houses
19
Policy IssuesPolicy Issues
20
• Specialized Institutions vs. Universal Institutions
• Augmenting funds for the sector
• Resource Mobilization & Deployment
• Facilitating the growth of Secondary market
• Lending Discipline & Quality of Assets
• Tapping Overseas Market – Lendings & Investments
Growth of Housing Finance Growth of Housing Finance SectorSector
21
• Housing Policy at National & Regional level
• Integrated with Financial Sector
• Fiscal & Financial Sector Policy
• Institution-Building & Product Innovation (Supply & Demand Side)
• Deregulation with closer Supervision (Finance & Construction Sector )
• Flow of Funds & Efficient Housing Market
Policy ReformsPolicy Reforms
22
• Identify subsidy-based and market-based segments and nature of interventions
• Complementarities
• Ensure adequate and sustained funding for both segments
• Ensure adequate supply of land and housing for both segments
• Market-based approach and state/local level policy interventions
Market SegmentsMarket Segments
• De-risk the segment through suitable risk mitigants both in the financial segment and the real sector segment (demand and supply side)
• Develop a role for the government in low income housing, consistent with the market orientation of the rest of the segments (without conflicting)
• Develop securitisation for funding
• Revisit the fiscal and credit regime to ensure that housing gets its fair share of financing from the system
• Develop policies so that housing is able to compete fairly with other sectors for funds
23
Policy PrescriptionsPolicy Prescriptions
24
State Govt./ Builders
Banks/ HFCs/ MFIs
Borrowers
Enabling Fiscal and
Credit Policy
Enabling Land Policy
for Construction
Subsidy/Guarantee Fund/
Credit Enhancement
Land TenureFirst / Second Loss Facility
SPV Project
Individual Loans
Construction Finance
Specialized Funding Agency
Institutional Institutional StakeholdersStakeholders
• No Broad-brush Approach
• Need for Segmented Intervention
• Role of State Governments & Public Agencies
• Supportive Fiscal & Credit Policy
• Market/Subsidy based Approach
• Developing innovative products and institutional mechanism
25
Summing UpSumming Up
• Identify land for construction
• Liberalize construction finance for low income housing
• Project approach and economies of scale
• Price determination – a critical consideration
• Develop mechanism for Demand Registration
• Tap Savings potential – building borrowers’ equity
• Actively involve supply side agencies, private and public
26
Summing UpSumming Up
• Widening stakeholders’ base
• Broadening Institutional infrastructure
• Securitisation through Government support
• Risk Mitigation Vehicle
• Funding Source and Delivery Channels
• Construction and Finance Delivery
27
Going ForwardGoing Forward
28
• Affordable House Price
• Affordable Credit
• State Govt./Municipal Bodies to provide land and infrastructure
• Public/Private builders to construct
• Pricing & Credit critical
• Credit Risk Mitigation
• Credit Guarantee Fund
INCLUSIVE GROWTH WITH STABILITY
Conclusion Conclusion
Thank YouThank You