Académique Documents
Professionnel Documents
Culture Documents
(b) Meeting the annual charges consisting of the upkeep and maintenance
expenses including rehabilitation of kutcha houses, taxes, interest and
amortization charges on capital; and
102
Housing finance and housing financing system in India
2. mortgage-orientation
103
Housing finance and housing financing system in India
borrower, nor a lender be”, would, if followed, make it impossible for most
people to own their homes.iii
104
Housing finance and housing financing system in India
Over and above problems, housing finance bristles with several risks.
These risks emanate from the peculiarity of housing commodity. Because of its
uniqueness the housing market is unstable and unorganized. Its prices or rents
are liable to violent fluctuations. Houses are much less negotiable than most
other forms of investment. Housing selling is a time-taking business. It is
difficult to dispose of old house. The gap between the prices or rents of old and
new house property alerts rapidly. As the report of the United nations says,
”when the gap is wide there is danger of capital loss in building or buying new
dwellings; when gap is narrow the older houses are risky purchases.” vi
There is always the risk that a particular house may fall in value owing
to various reasons. With the passage of time the architectural style may become
notorious. A cut in the public transport services or the growth of a slum may
have the same effect.
105
Housing finance and housing financing system in India
Thus the valuation of the house property is quite laborious and full of
uncertainties and so full of risk and hence, lenders hesitate to lend. With the
result, housing finance tends to develop at a very low pace.
Before lending against the security of house, the lender must make
certain that full ownership of the house is actually on the name of the borrower,
and he also must make sure that no other claims to the property are
outstanding. In India, because of the prevalence of inheritance and other laws it
106
Housing finance and housing financing system in India
is not easy to trace out these information correctly and if at all successful in
that because of the Punjab land Alienation Act and similar laws it is not easy to
take possession of the mortgaged house property by resorting to court. Further,
the complexities of mortgage loan-laws may give rise to substantial expenses
on the part of the lender, if the borrower defaults on his loan.
Since housing finance is involved deeply in these risks, housing does not
have the normal facilities of finance available to either agriculture or industry.
In view of these risks and problems of housing finance, one can rightly
conclude that financing of housing programmes presents a knotty problems for
the lower income groups and these problems are of universal nature, prevalent
both in advanced and developing countries. It is commonsense to consider
these risks and problems all the more present in this underdeveloped country
where there is widespread poverty and backwardness and little experience in
the field of housing.
107
Housing finance and housing financing system in India
(a) Secured:
108
Housing finance and housing financing system in India
the actual, government identified housing sector as a core and it is only with
the timely in intervention of the government that housing finance has become a
major industry in India. With the establishment of National Housing Bank, the
government has provided the much-needed boost to this sector. At present out
of 380 odd HFIs in India, 42 housing finance companies are registered with the
National Housing Bank out of them 20 are valid for acceptance of public
deposits and remains are not. This number is going to increase in the near
future with the industrial growth. Throughout the second part of the last
decade, this sector has witnessed a growth of over 30 percent and promises to
grow the same rate in the next couple of years. Recognizing the growing need
of housing finance in India, the government has emphasized on housing and
housing finance in the ninth five year plan to know that there is a short fall of
more than 20 mission house units. This is the first time that India has
emphasized on the housing sector.
To regularize the housing finance sector in India, the government has set
up HUDCO in 0970vii. It was soon followed by setting up of the Housing
Development Finance Corporation (HDFC) in 1978 in the private housing
finance sector with the support of ICICI, the International Finance Corporation
109
Housing finance and housing financing system in India
and the Aga Khan Fund. The major objective behind setting up of HDFC and
HUDCO has been to enhance the residential housing stock by providing an
avenue for housing on a systematic and professional basis. Another inherent
objective was to increase the flow of resources to this sector by integrating the
domestic housing sector with the capital markets. Till 1988, HDFC was the
only formal housing finance company operating in India and it is after 1988,
the Banks and insurance companies forayed into this sector. With the entry of
insurance giants like Life Insurance Corporation of India (LIC) in 1989 and the
General Insurance Corporation (GIC) in 1990. The sector witnessed a three-
fold increase in activity. Almost a similar point of time, public sector banks
also forayed into this sector Canara Bank’s Can fin home, State Bank Of
India’s SBI Home Finance. No doubt, the market has immense untapped
potential as well as growth. In the last five years, the housing finance market in
India has been witnessing a growth of over 30 percent and it is expected that
this will continue in the next couple of years. According to an independent
survey, about 60 percent of the Indian households approach informal sources of
finances to borrow funds. It is estimated that if the present rate of growth of
population continues, then by 2010 India would require of an average 2.5
million to 3 million additional houses annually. At present only 20 percent of
the new houses are constructed by the finance of formal housing finance
companies. If, atleast 50 percent of this informal market turns into formal
market then it means a huge fortune for the housing finance institutions.
Housing finance industry did not has much formal introduction because
traditionally, as far as the builders are concerned, financing of construction is
largely done through advances from customers which in turn will affect the
demand for housing. In early eighties salaried individuals who wanted to buy
flats did not have many institutions to approach for finance. Raising finance for
acquiring a house was a painful process, as the house hunt itself. Only a few
institutions in the market were there to help individuals to acquire finance, and
110
Housing finance and housing financing system in India
that too at exorbitant rated of interest. The few housing finance institutions in
the market were HDFC and a few back, and small number of non-banking
companies. Moreover their reach was largely restricted to the major cities and
they were known to a select few. The rates of interest ranged between12%
to18% and it was basically a seller’s market but now if we see the present
situation of the housing market, there is sea change in the recent years
specially, last two decades. The development of Housing Finance System in
India in the form of institutionalised and formal housing finance super structure
is relatively of a recent origin.
111
Housing finance and housing financing system in India
112
Housing finance and housing financing system in India
NHB P
Development Financial
Institutions
NABARD
Financial Institutions
Housing Finance
U
Companies
Non-Banking Finance
Companies
Other NBFCs
Co-operative Banks
District co-operative Bank
L
Scheduled State Co-
operative Banks
113
Housing finance and housing financing system in India
In the first plan (1951-56), housing was introduced into the policy
framework at the national level. Affordability was emphasised as the key issue
and government support through subsidies and loans were deemed necessary. A
separate Ministry of Works and Housing was established and the National
Buildings Organisation was created. This plan in fact became the benchmark
for subsequent Five Year Plans for the next two decades.
The second plan (1956-61) strengthened the schemes of the first plan
by expanding coverage. However, there was a policy shift as the central
government decided to provide assistance to state governments to develop low-
income housing instead of directly providing loans to low-income groups. This
gave rise to State Housing Boards that still remain in existence today.
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Housing finance and housing financing system in India
It was during the fifth plan (1974-79) that the Urban Land (Ceiling and
Regulation) Act (ULCRA) was introduced. ULCRA sought to prevent
concentration of land holding in urban areas and make more land available for
equitable disbursal. However, it failed to achieve its goals and its repercussions
are still being felt today. Significantly, as a completely private sector initiative,
in 1977, the first retail housing finance company, Housing Development
Finance Corporation (HDFC) was set up. HDFC sought to provide financial
assistance to individuals, groups, co-operative societies and companies for staff
housing.
115
Housing finance and housing financing system in India
It was the seventh plan (1985-90), however, that brought about a radical
change in government policies. As Garg puts it, the plan “emphasised the need
for radical reorientation of all policies relating to housing and argued that the
major responsibility of house construction would have to be left to the private
sector, and in particular, the household sector. Further, the government should
be involved in housing not so much to build but to promote housing activity”
(Garg, 1998). It was also during this time that several reforms were made. The
UN Global Shelter Strategy, of which India subscribed to, was passed in the
UN General Assembly in 1988. This gave the impetus to the drafting of a
National Housing Policy for the first time. Another major reform that took
place at the time was the founding of the National Housing Bank (NHB) in
1988. The NHB was founded to promote and regulate housing finance
companies and to mobilise additional resources for housing. A Building
Materials and Technology Promotion Council was also formed. During this
period, several housing finance companies were promoted. Commercial banks
still shied away from direct lending to housing finance.
The eighth plan (1992-97) built on the foundations of the seventh plan,
again acknowledging that housing related activities belonged in the private
sphere, although admitting that there was room for state intervention to provide
housing to low-income groups. It was during the eighth plan that the National
Housing Policy was first adopted by Parliament in 1994. Importantly, the plan
recognised that urbanisation was inevitable and concentrated resources on
upgrading urban centers. It recommended that reforms should be made on both,
the financial and legal aspects to allow the mortgage market to develop further.
It laid special emphasis on government incentives to enhance the flow of credit
to the housing sector through housing finance institutions.
116
Housing finance and housing financing system in India
laid on market friendly reforms for improving both taxes and infrastructure to
help increase investments into housing. Both plans stress on abolishing old
laws. In 1999, the central government repealed ULCRA. The government also
adopted a revised National Housing Policy in 1998 and prepared another draft
in 2005. The ninth and tenth five-year plans are also characterised by the
aggressive entry of commercial banks into housing finance.
o 1987: India’s insurance act was emended to allow LIC and GIC to
directly issue mortgage loans.
o 1989: RBI began to allow commercial banks to make large loans for
housing without an interest rate on loan quantity cap.
117
Housing finance and housing financing system in India
o 2002: The initiative had taken in the housing finance area in the last four
years have shown positive results. Total disbursement from housing
finance institutions in 2000-2001 was Rs. 26300 crore, a growth of
about 28 percent in the year. This amount financed the construction of
about 28 lacs houses, much higher than the annual target of 20 lacs
houses. In the current year the growth rate is expected to be around 35
percent. To further strengthen housing finance the measures are being
taken.
118
Housing finance and housing financing system in India
119
Housing finance and housing financing system in India
Table (4.6.1) shows that The total investment proposed in housing has
increased from Rs. 11.5 billion under the first plan to Rs. 7.26 trillion viii (US $
0.15 trillion) in the tenth plan. However, the absolute investment in housing as
a percentage of the total plan investment has declined due to the shift in the
government’s emphasis from provider to facilitator (Garg, 1998).
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Housing finance and housing financing system in India
Table 4.6.1
Housing Investment during the Five-Year Plans
(Rs. in Crores)
Total Investment in Economy Total Investment in Housing %o
%of %of
private
public investment
housing
Plan period housing in housing
Public Private Total Public Private Total to
to public to total
private
total investment
total
First plan 1560 1800 250 900
3360 1150 16 50 34.2
(1951-1956) (46.4) (53.6) (21.7) (78.3)
Second plan 3650 3100 300 1000
6750 1300 8.2 32.3 19.3
(1956-61) (54) (46) (23.1) (16.9)
Third plan 6100 4300 425 1125
10400 1550 7 26.2 14.9
(1961-66) (58.6) (41.4) (27.4) (72.6)
Fourth plan 13655 8980 625 2175
22635 2800 4.6 24.2 12.4
(1969-74) (60.3) (39.7) (22.3) (77.7)
Fifth plan 31400 16161 1044 3636
47561 4680 3.3 22.5 9.8
(1974-79) (66) (44) (22.3) (77.7)
Sixth plan 97500 74710 1491 18000
172210 19491 1.5 24.1 11.3
(1980-85) (56.6) (43.4) (7.7) (92.3)
Seventh plan 168148 180000 2458 29000
348148 31458 1.5 16.1 9
(1985-90) (48.3) (51.7) (7.8) (92.2)
Eighth plan 31500 66000
797950 97500 12.2
(1992-1997) (32.3) (67.7)
Ninth plan 52000 99000
151000
(1997-02) (34.4) (65.6)
Tenth plan * 415000 311300
726300
(2003-07) (57.1) (42.9)
Eleventh plan 507318.1@ 373560#
880878.1
*(2007-2012) (57.6) (42.4)
Figures in brackets indicate the percentage share to respective total
121
Housing finance and housing financing system in India
Private sector involvement in retail housing finance did not begin until
the setting up of Housing Development Finance Corporation Limited (HDFC)
in 1977. HDFC specialised in providing housing finance to individuals, co-
operative societies and the corporate sector. HDFC’s initial share capital
included subscription from His Royal Highness the Aga Khan and International
Finance Corporation, Washington (IFC).
122
Housing finance and housing financing system in India
Towards the mid and late 1980’s a few housing finance companies were
set up either as private limited companies (e.g. Dewan Housing Finance
Limited) or as a joint venture with partnership from the state government (e.g.
Gujarat Rural Housing Finance Corporation) or bank sponsored housing
finance companies (e.g. Can Fin Homes, SBI Home Finance, PNB Housing
Finance). Even state owned insurance companies like the Life Insurance
Corporation and the General Insurance Corporation of India set up housing
finance arms.
123
Housing finance and housing financing system in India
Specialised housing finance institutions have been set up with the sole
purpose of financing house construction/purchasing activities. HUDCO was
established on 25th April 1970ix, as a wholly owned subsidiary and government
owned enterprise with a view to ameliorate the housing conditions in the urban
and rural areas of the country, build new satellite towns, finance building
material industries, undertake consultancy in the areas of housing and urban
development, conduct research in low-cost and assist various agencies dealing
with housing and urban development in a positive manner. In brief, the
principal mandate of HUDCO is to ameliorate the housing conditions of low-
income group and the Economically Weaker Sections. With the expansion of
HUDCO’s authorized capital form Rs. 2 crores to Rs. 2500 crores in March
2002. Today, HUDCO is financially a strong company with a paid up capital of
Rs. 2001.90 crores and net worth Rs. 3588.55 crores, equity infusion projected
during the 9th period from Ministry of Urban Development and Poverty
Alleviation related to housing and urban development activities, and the
Ministry of Rural Development for rural human settlement activities, HUDCO
has geared to increase its resource mobilization in a substantial manner during
the 10th plan period. Over the years, the equity base has been expanded by the
government. It has further been able to mobilized additional resources from
institutional agencies like LIC, GIC, UTI, banks International assistance,
USAID as well as through public deposits. The cumulative resource base of
HUDCO is Rs. 5056 crores, comprising of equity of Rs. 298 crores, reserves of
Rs. 367 crores and borrowing of Rs. 4400 crores. Overall sanctions and
released since the establishment of HUDCO by the end of 9 th plan amount were
Rs. 42012 crores and Rs. 29334 crores respectively.
124
Housing finance and housing financing system in India
125
Housing finance and housing financing system in India
place to go for housing finance. Ever since its incorporation, it has financed
over 1.2 million units. The institution’s share in the organized housing finance
market in India is over 36%. HDFC is pioneered the concept of housing finance
in the private sector and was instrumental in the development of the industry.
ICICI promoted HDFC as development financial institution. It prepared the
initial feasibility study report which helped in securing equity participation
form International Finance Corporation and the Aga Khan Foundation for
economic development and paved the way for the mobilization of equity
participation by LIC, GIC, commercial Banks and large number of industrial
housed in HDFC.
126
Housing finance and housing financing system in India
direct HFC’s to send a copy of the balance sheet, and profit and loss account/
other annual accounts of depositors holding specified amount of deposits. They
must furnish statement/information/particulars in compliance with directions in
the prescribed time to time. It is the duty of the auditors of HFC’s to enquire
about the compliance with the NHB directions submission of statements/
information/particulars. If they are not satisfied, they must submit a repost to
the NHB giving the aggregate deposits. Such reports should also form part of
their statuary reports under the companies Act. The NHB can conduct and
inspection by its officers/employees or other persons of HFC’s to verify the
correctness and completeness of statements/information/particulars furnished
by them. Such inspection can also be conducted to obtain information, which
the HFC’s have failed to furnish in compliance with the directions. The
direction/member of committees/ other employees/officers/must provide to the
inspecting authority, all statement, and information, within a specified time.
Milestones of NHB
Financial
Particular
Year
1. Refinance Schemes for housing loans
2. Schemes for Land Development & Shelter Projects
1988-89
3. Scheme for Equity Participation in Housing Finance Companies
(HFCs)/Building Materials Companies
1. Home Loan Account Scheme
2. Housing Finance Companies (NHB) Directions, 1989
1989-90
3. Raised Loan of US$25m (first tranche) under USAID Govt.
Housing Guaranty Program
1990-91 1. Notified as a Public Financial Institution
1. Received a Loan Assistance of Yen 2,970 billion from OECF (now
1991-92
JBIC) 2. Scheme for Financing Housing Infrastructure
1992-93 1. Refinance Schemes for Slum Redevelopment Projects
1. Launched the issue of Unsecured Bonds
1994-95
1. Guidelines for Prudential Norms for HFCs
1. Golden Jubilee Rural Housing Finance Scheme (GJRHFS)
2. Issued Tax Free Bonds to finance
1997-98
3. Drawn from ADB US$20m in 1997-98 and US$30m in 1998-99
GJRHFS
127
Housing finance and housing financing system in India
128
Housing finance and housing financing system in India
129
Housing finance and housing financing system in India
130
Housing finance and housing financing system in India
131
Housing finance and housing financing system in India
2 Total Grain Loan 40,691 46,927 44,399 6,236 15.3 -2,528 -5.4
Total bank Loan
3 except grain 14,04,840 18,01,239 22,03,038 3,96,399 28.2 4,01,799 22.3
Loan
3.1 Housing Loan @ 1,85,203 2,30,994 2,55,653 45,791 24.7 24,659 10.7
Total Loan to
4 5,10,738 6,34,142 7,38,686 1,26,404 24.2 1,04,544 16.5
priority sector
Housing Loan
out of total Loan
4.4 1,33,200 1,60,345 1,82,646 27,145 20.4 22,301 13.9
to Priority sector
#
Table (4.6.4) shows the housing finance disbursed by banks total loans
to housing was 27,145 crores in 2006-07which decreased up to 22,301 crores
during the year 2007-08.
132
Housing finance and housing financing system in India
It was not till the late 1990’s that banks actively got involved in housing
finance. Against the backdrop of lower interest rates, industrial slow-down,
sluggish credit off-take and ample liquidity, commercial banks recognised that
if they had to maintain their profit margins they needed to shift their focus from
the wholesale segment and build their retail portfolios. The lower interest rate
133
Housing finance and housing financing system in India
regime, rising disposable incomes, relatively stable property prices and fiscal
incentives made housing finance an attractive business. Further, housing
finance traditionally has been characterised by low non-performing assets and
given the vast demand for housing loans, almost all the major commercial
banks plunged into the business of home loans.
The primary societies – the primary cooperatives can briefly be classified into
following 4 groups;
134
Housing finance and housing financing system in India
Table 4.6.5
Share of Different HFI in Housing Finance Market
(i) Life Insurance Corporation of India 38.40%
(ii) National Housing Bank 9,6%
(iii) Commercial and Cooperative Banks 23.40%
(iv) Housing and Urban Development Corporation 18.00%
(v) State Governments 2.80%
(vi) Other Sources 4.10%
Total 96.30%
Source: Report of the 11th five year plan, working group on Urban housing, Govt. of India, Ministry of
Housing and urban poverty alleviation, New Delhi.
Table (4.6.6) shows that during the first three years of 10 th Five Year
Plan i.e. 2002-03, 2003-04 and 2004-05, the Apex Cooperative Housing
Federations could raise an amount of Rs.1774.43 crore from various funding
agencies like LIC, NHB, HUDCO, Commercial and Cooperative Banks and
other sources. The Apex Federations disbursed loans of the order of Rs.1685.71
crore to their primary housing cooperatives as well as individual members for
135
Housing finance and housing financing system in India
the construction/financing of 1,26,071 housing units during the first three years
of 10th Five Year Plan. The year-wise details are given below:
Table 4.6.6
Details of Loan Disbursement and Number of Housing Units Financed by
Apex Federations during 2002-2003 to 2004-2005
136
Housing finance and housing financing system in India
Right from the first Five Year Plan, the role of private sector including
efforts by the individual families in fulfilling the housing needs is well
recognized. Of late, lowering of bank rates has resulted in easy access to funds
for housing by individuals and consequently also provided a boost to real estate
development by the private sector. However, most of the housing units
generated by the private sector cater to the upper income households and both
financial institutions and developers chase the MIG/HIG sections. As a result of
these developments, there is a considerable development of higher standard
housing particularly in big cities wherein multinational and corporates are
expanding their business.
137
Housing finance and housing financing system in India
138
Housing finance and housing financing system in India
The construction of semi-pucca houses during the plan period has been
assumed to be in the EWS category. The maximum requirement for new pucca
construction has been assumed to be for the EWS and LIG categories
constituting 81 percent of the new housing requirement, which also include the
additional housing shortage of 1.82 million during the 11th plan period, whereas
MIG and HIG categories would account for the rest 19 percent. The
distribution of the housing requirement adopted for estimating the investment
needs is as in Table (4.7.1).
139
Housing finance and housing financing system in India
Table 4.7.1
Income wise distribution of Housing Requirement
(in millions)
Sl Total Housing
Category Basis of Assumption
No. Units
1 Pucca Housing 6.00
(a) EWS EWS New -43% of Pucca 2.58
(i) Shelter upgration 12.5% EWS New 0.32
(ii) Sites & Services 12.5% EWS New 0.32
(iii) Skeletal Housing 25% EWS New 0.64
(iv) Plotted Housing 50% EWS New 1.29
(b) LIG LIG New -38% of Pucca 2.28
(c) MIG MIG New -11% of Pucca 0.66
(d) HIG HIG New -8% of Pucca 0.48
Semi-Pucca
2 EWS 0.89
upgradation
3 Kutcha upgradation EWS 0.38
TOTAL NEW HOUSING (1+2+3)
7.27
Source: Report of the 11th five year plan, working group on Urban housin , Govt. of India, Ministry of
Housing and urban poverty alleviation, New Delhi.
140
Housing finance and housing financing system in India
Table 4.7.2
Unit Cost of House Construction
Unit costs of Construction adopted for Million-plus Metropolitan cities
Basis of Unit Cost in
Category
Assumption Rs./Hsg Unit
EWS
Based on the projections and the estimated unit costs, the investment
requirement to cover the shortage at the beginning of the XI Plan is given in
Table. The total requirement of funds for meeting the housing shortage at the
beginning of the XI Plan (i.e. 2007) works out to be Rs. 147195.0 crores.
141
Housing finance and housing financing system in India
Table 4.7.3
Housing Investment Requirement during XI plan
(Hsg units in millions)
Total Other Urban Areas Million Plus Metro
Grand Total
Hsg (62.2%) (37.8%) of Fund
Unit
Category Unit Cost Total Inv. Requirement
Unit Hsg Hsg Cost in Total Inv. (Rs.
in Rs./Hsg (Rs.
Units Units Rs./Hsg (Rs.)
s Unit Million) Millions)
Unit
Housing for the
2.8
shelterless 7.47 4.65 78,000 362700 97,500 274950 637650
2
households
Relieving 4.7
12.67 7.88 40000 315200 50,000 239500 554700
Congestion 9
Upgradation of 0.8
2.18 1.36 35,000 47600 43,750 35875 83475
Kutcha 2
Replacement of
2.39 1.49 75,000 111,750 0.9 93,750 84,375 196125
Obsolete houses
15.3 9.3
Total 24.71 565539 429610 1471950
7 4
Source: Report of the 11th five year plan, working group on Urban housing , Govt. of India, Ministry of
Housing and urban poverty alleviation, New Delhi.
142
Housing finance and housing financing system in India
The fund required for meeting the additional (New) housing units during
the XI plan period was estimated in table (4.7.4).
Table 4.7.4
Investment Required to cover Housing Requirements at the
beginning of the 11th Plan
(Hsg. Units in millions)
Category Other urban areas (62.2%) Million plus Metro (37.8%)
Total
Total Grand Total
hsg Hsg Total Hsg Unit
EWS Unit Cost investme Fund
sunits units investment units Cost
nt requirement
Shelter
0.32 0.2 78000 15600 0.12 97,500 11700 27300
Upgradation
Sites &
0.32 0.2 35000 7000 0.12 43750 5250 12250
Services
Skeletal
0.64 0.4 57000 22800 0.24 71250 17100 39900
Housing
Plotted
1.29 0.8 100000 80000 0.49 125000 61250 141250
Housing
LIG 2.28 1.42 160000 227200 0.86 200000 172000 399200
MIG 0.66 0.41 965600 395896 0.25 1207000 301750 697646
HIG 0.48 0.3 1448400 434520 0.18 1810500 325890 760410
Semi-Pucca
0.89 0.55 50000 27500 0.34 62500 21250 48750
upgradation
Kutcha
0.38 0.24 35000 8400 0.14 43750 6125 14525
upgradation
Total new
7.26 4.52 2.74 2141231
housing
Source: Report of the 11th five year plan, working group on Urban housing , Govt. of India, Ministry of
Housing and urban poverty alleviation, New Delhi.
143
Housing finance and housing financing system in India
The total fund requirement in the urban housing sector for the XIth Plan
period was estimated to be Rs.361318.1 crores. The summary of investment
requirements for XI Plan period was indicated below:
Investment Requirement
Scenario
(in Rs. crores)
Housing Shortage at the beginning of XI Plan Period 147195
New additions to the housing stock during the XI Plan
Period including the additional housing shortage during 214123.1
the plan period.
Total Housing Requirement for the XI Plan Period 361318.1
Source: Report of the 11th five year plan, working group on Urban housing , Govt. of India, Ministry of
Housing and urban poverty alleviation, New Delhi.
The flow of funds for housing sector during the X plan period and
estimates the expected flow of funds to the urban housing sector from the
formal sector institutions for the XI plan period.
During the 10th Plan period, the total urban housing requirement was
22.44 million units for which the investment requirement was more than Rs.
4.27 lacs crores. Of this total fund requirement more than 50% was the
expected contribution from the formal sector institutions including banks,
housing finance companies, other financial institutions and budgetary
allocations. From the available data it has observed that the banks, housing
144
Housing finance and housing financing system in India
Table 4.8.1
LOAN DISBURSEMENT DURING 11th PLAN
Total Housing Loan Disbursements (Rs. in crore)
Institutions
2002-03 2003-04 2004-05 2005-06 (P) 2006-07(P)
Commercial Banks 23,553 32,816 50,398 60,000 67,000
HFCs 17,832 20,862 26,000 29,500 32,500
Co-op. Institutions 642 623 421 500 500
Total 42,027 45,301 76,819 90,000 1,00,000
Source: Report of the 11th five year plan, working group on Urban housing , Govt. of India, Ministry of
Housing and urban poverty alleviation, New Delhi.
From the various indicative reports like flow of credit for rural housing
under various ongoing schemes like Golden Jubilee Rural Housing Finance
Scheme, it has observed that approx. 15% of the above mentioned institutional
credit was flowing towards rural housing. Therefore, it is estimated that about
Rs.3.0 lacs crores of institutional credit would be flowing towards urban
housing during the 10th Plan period i.e. 2002-07.
As per the estimates the urban housing shortage at the beginning of the
11th plan period was 24.71 million units. In addition to this, it is expected that
7.27 million units would be constructed during the plan period. The total funds
required to meet the total construction of the dwelling units during the 11 th Plan
period would be around Rs. 3.61 lacs crores. In view of the current economic
and monetary scenario it is expected that the housing finance disbursals by
banks, HFCs and cooperative sector institutions would grow at a rate of about
15% per annum during the 11th plan period. Taking this into account, it is
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Housing finance and housing financing system in India
estimated that the flow of credit disbursal from these institutions would be
about 7.75 lacs crores (gross flow of funds) during 2007-12 as shown in Table
(4.8.2). Assuming the flow of credit to increase to 25% for rural housing during
11th plan period, it is estimated that about Rs. 5.80 lacs crores would be the
credit flow towards urban housing.
It may be pointed out that these projected fund flow figures include
multiple counting and resale of properties, in the sense that cross-funding/ bulk
borrowing is involved among the various institutions. It is therefore, assumed
that the net flow of funds to the housing sector from formal sector institutions
would be 50% of the gross flow of funds, for construction of new houses, given
in the Table (4.8.2). This comes to approximately Rs.2.90 lacs crores, which is
80% of the total investment requirements for urban housing for the 11th Plan.
Table 4.8.2
EXPECTED FLOW OF FUNDS
Expected Total Housing Loan Disbursements (Rs. in crore)
Institutions 2007-08 2008-09 2009-10 2010-11 20011-12
Commercial Banks 77,000 88,000 102,000 117,000 135,000
HFCs 37,500 43,500 49,500 57,500 66,500
Co-op. Institutions 500 500 500 500 500
Gross Flow of Fund Total
132,000
Housing 115,000 152,000 175,000 201,000
Gross Fund Flow for
Urban Housing 86,250 99,000 114,000 131,250 150,750
Net Fund Flow for Urban
Housing (50% of Gross
Urban Housing) 43,125 49,500 57,000 65,625 75,375
Net Fund Flow for Urban Housing for the 11th Plan period 2,90,625
Source: Report of the 11th five year plan, working group on Urban housing , Govt. of India, Ministry of
Housing and urban poverty alleviation, New Delhi.
So the total housing finance requirement for 11 thfive year plan would be
361318.1 crore rupees and total fund provided form formal sector would be
290625 crore rupees only so, the total shortage would be Rs. 70693.1 crore.
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Housing finance and housing financing system in India
147
i
Wallace F. Smith, ‘Housing-The Social and Economic Elements’, University Of
California Press, Barkeley and Los angeles, 1970. P.98
ii
Charles Abrams, ‘Housing in the Modern World-Man’s Struggle for Shelter in an
Urbanizing World’, Faber, London, 1969, p. 106
iii
Ibid.
iv
Ibid.
v
‘The Function and working of the reserve Bank of India’, July,1970
vi
‘United Nations, Methods and Techniques of Financing Housing in Europe’, 1952
vii
Bedi, H.L., Haridikar, ‘V.K., Housing and Urban Development Corporation’, Practical
Banking Advances, 9th Edition, 1997
viii
Tenth five year plan documents 2002-2007
ix
HUDCO, 38th annual report 2007-08
x
K. V. Verghese, ‘Housing Problem in India, Economic and social aspects’, Eureka
Publications, New Delhi
xi
“Report of the Task Force on Cooperative Housing, Third Draft”, 2005.