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Post NHB
Commercial banks get active in direct lending for housing finance Microfinance institutions and foreign banks get active in the housing finance market. 54 HFCs active in the market
Pre 1970
1971
1977
1984
1988
Late 90s
2008
2009-11
HDFC Bank, ICICI Bank, Axis Bank, ING Vysya Bank etc.
Foreign Banks
DHFL, HDFC, GRUH, Indiabulls Housing Finance, Reliance Housing Finance, Sundaram BNP Paribas, Religare Housing Development Corp etc. LIC Housing Finance, GIC Housing Finance etc.
Insurance Companies
Key Players providing Home Insurance: New India Assurance, National Insurance, ICICI Lombard, Bajaj Allianz, IFFCO-TOKIO, Tata AIG etc.
Micro Housing Finance Corporation, MAS rural housing and mortgage finance etc.
HUDCO, NABARD, SIDBI, Apex Co-operative Housing Federations, State Co-operative Agriculture and Rural Development Banks etc.
Housing Societies
Credit Growth
32% 50%
25% 23%
22% 13%
14% 8%
21% 13%
Market Share
26% 74%
27% 73%
31% 69%
33%
67%
36%
64%
Currently there are around 54 HFCs registered with NHB (19 HFCs are allowed to accept public deposits) Share of HFCs in the mortgage market is expected to grow from 26% in 2005 to 36% in 2015. The increase is attributed to the strength of their focused approach, targeting of special customer segments, relatively superior customer service, and significant growth plans.
still missing. Trade associations like FICCI, CII, ASSOCHAM etc. do not have a separate housing wing for housing finance companies.
Key Indian entrepreneurial families are not inclined to make housing finance as one of their main business units. Eg: Mr. Kumar Mangalam Birla, Mr. Mukesh Ambani, Mr. Adi Godrej, Mr. Anand Mahindra.
DHFL & HDFC have shown the way to be reckoned as premier housing finance institutions tapping
Limited Capital Market Listing
the capital markets. However, there is a dearth of HFCs getting listed on the stock exchanges. No major Housing finance company listed in recent years.
New HFCs remain on the fringes and are best described as marginal players. They are not able to make significant impact in the growth of the industry
Facilitation by NHB towards building a trade association of HFCs. Inclusion of HFCs in major trade associations like FICCI, CII, ASSOCHAM etc.
Support from NHB to new HFCs in the market by bringing out action oriented plans to ensure the scalability of these companies. This would help them to enjoy strong and sustainable growth in
future.
Overleveraging of CAR and enhanced borrowing powers to support the scalability of existing as
well as new HFCs.
Powers
There is NO need to follow practices of other countries that have different socio-Economic Culture. Being risk averse by nature, an average Indian borrower is less likely to default on loan repayments. Comfortable loan-to-value and instalment/ income ratio with quality credit appraisal has ensured growth with stable asset quality.
Best managed companies on a larger balance sheet having efficient collection & recovery mechanism operate at less than 0.50% of NPA
Worst players have inefficiency in their collection & recovery efforts. Hence the quality of assets take a beating. These companies operate at NPA levels in the range of 1.85-2.25%.
Book keeping of loan customer accounts and Document safeguard / retrieval through in-house/outsource model. Quality of auditors with domain expertise stands missing. Understanding that SARFAESI is not a threat but a facilitating mechanism. Given housing finance a state subject, the quality remains subjective. Further , objectivzing end-to-end operations of housing finance remains a big challenge.
As discussed, the mortgage market has remained upbeat given the nature of borrower (being end-user) and their risk-averse behaviour.
The mortgage demand is primarily dominated by first time home buyers and is not much speculative in nature.
This is evident from the fact that even during the crisis period of 2008-09, GNPA for HFCs remained well within their comfort zone. Over the years, asset quality has shown material improvement driven by adequate appraisal systems and effective recovery mechanism. Also, through stringent provisioning norms, NHB has ensured adequate cover.
Indian mortgage market is majorly characterized by first time loan borrowers with a conservative mindset. Technical jargons and use of heavy language is not well understood by most of the customers. Educating the customers about the home loan products in simple and easy to understand language remains the key. Biggest challenge for HFCs is to provide quality service to all the customer classes as per their needs.
Globals
(Income: >Rs.10 Lacs p.a.)
Strivers
(Income: Rs.5-10 Lacs p.a.)
Many
Easy
Highly Sensitive
Highest
Seekers
(Income: Rs.2-5 Lacs p.a.)
Comparatively Less
Relatively Easy
Relatively High
Aspirers
(Income: Rs.1-2 Lacs p.a.)
Very Few
Difficult
Not Sensitive
Relatively Less
Deprived
(Income: < Rs.1 Lac p.a.)
Customers behave differently across income levels on various business parameters It is important not to lose sight of customers needs and wants. Organization psychology needs to be aligned with the same.
Is there a need felt to have only approved mortgage brokers / originators towing to regulatory guidelines? Need for an escalation mechanism similar to IRDA for wrong selling / commitment of home loan products? Guidelines for superior customer service in order to enhance customer engagement Penalty for non service / wrong service
Should it hit the rating of Housing Finance Companies? Should it affect the refinancing option available?
Should customer service be made an important and uncompromising business parameter for all HFCs?
Responsible lending along with superior customer service would ensure satisfaction of all the stakeholders in the mortgage market and contribute towards sustainable growth
As the first milestone, mortgage as a % of GDP should be increased to 20% by 2020 Can we all together do it with NHB & RBI as the guardian of the industry?
THANK YOU