housing finance

ASIAN DEVELOPMENT BANK PCR: IND 30011 PROJECT COMPLETION REPORT ON THE Housing Finance Project (Loans 1549-IND, 1550-IND, and 1551-IND) IN INDIA August 2003 CURRENCY EQUIVALENTS Currency Unit – rupee/s (Re/Rs) At Appraisal 20 August 1997 At Project Completion 26 January 2001 Re1.00 = $0.028 $0.21 $1.00 = Rs35.7 Rs46.4 ABBREVIATIONS ADB – Asian Development Bank ARDB – Agricultural and Rural Development Bank AMC – Ahmedabad Municipal Corporation BME – benefit monitoring and evaluation CAR – capital adequacy ratio CFI – community-based finance institution CBO – community-based organization FIRE – financial institutions reform and expansion HDFC – Housing Development Finance Corporation Limited HFC – housing finance company HFI – housing finance institution HUDCO – Housing and Urban Development Corporation Limited KfW – Kreditanstalt fur Wiederaufbau MBS – mortgage-backed security NGO – nongovernment organization NHB – National Housing Bank NPA – nonperforming asset RBI – Reserve Bank of India SOE – statement of expenditure TCS – thrift and credit society USAID – United States Agency for International Development UK – United Kingdom NOTES (i) The fiscal year (FY) of HDFC and HUDCO ends on 31 March, and of NHB, 30 June. FY before a calendar year denotes the year in which the fiscal year ends, e.g. FY2001 ends on 31 March 2001 for HDFC and HUDCO, and 30 June 2001 for NHB. (ii) In this report, “$” refers to US dollars. CONTENTS

Pa ge BASIC DATA iii I. BACKGROUND 1 A. History 1 B. Scope of Operations 1 C. Relationship with Asian Development Bank and Other Lenders 2 D. Relevance of Design and Formulation 2 E. Related Technical Assistance 3 II. IMPLEMENTATION 3 A. Lending Policies 3 B. Characteristics of Subloans 3 C. Implementation and Internal Operation of Subprojects 5 D. Operational Performance of the Borrowers 6 E. Borrower’s Financial Performance 7 F. Financial Statements and Ratios 8 G. Covenants 8 H. Performance of the Asian Development Bank 9 III. EVALUATION 9 A. Loan Appraisal 9 B. Implementation 11 IV. ASSESSMENT AND RECOMMENDATIONS 11 A. Relevance 11 B. Efficacy in Achievement of Purpose 12 C. Efficiency in Achievement of Outputs and Purpose 12 D. Preliminary Assessment of Sustainability 12 E. Other Impacts 13 F. Overall Assessment 13 G. Lessons Learned 13 H. Recommendations 14 APPENDIXES 1. Loan Utilization 15 2. Details of Subloans 19 3. Lending Channels 26 4. Chronology of Main Events in Project Administration 28 5. Projected and Actual Disbursement of Loan Proceeds 31 6. Organizational Structure 32 7. Lending Operations 35 8. Financial Statements of NHB 36 9. Financial Statements of HUDCO 39 10. Financial Statements of HDFC 42 11. Statement of Compliance with Major Loan Covenants 45 (iii) BASIC DATA A. Loan Identification 1. Country

2. Loan Numbers 3. Loan Title 4. Borrowers 5. Name of Development Financial Institutions 6. Amount of Loan 7. Project Completion Report Number India 1549/50/51-IND Housing Finance Project National Housing Bank (NHB), Housing and Urban Development Corporation Limited (HUDCO), and Housing Development Finance Corporation Limited Ltd. (HDFC) NHB, HUDCO, and HDFC $100 million each to NHB, HUDCO, and HDFC, totaling $300 million PCR: IND 759 B. Loan Data 1. Appraisal - Date Started - Date Completed 17 July 1997 31 July 1997 2. Loan Negotiations - Date Started - Date Completed 25 August 1997 28 August 1997 3. Date of Board Approval 25 September 1997 4. Date of Loan Agreement 6 November 1997 5. Date of Loan Effectiveness - In Loan Agreement - Actual - NHB - HUDCO - HDFC - Number of Extensions 4 February 1998 12 December 1997 11 December 1997 11 December 1997 None (iv) 6. Terminal Date for Commitments - In Loan Agreement - NHB

- HUDCO - HDFC - Actual - NHB - HUDCO - HDFC - Number of Extensions 11 December 2000 10 December 2000 10 December 2000 26 December 2002 27 December 2002 22 November 2002 One each 7. Closing Date - In Loan Agreement - Revised - Number of Extensions 30 June 2003 None None 8. Terms to the Borrower - Interest Rate - Maturity - Grace Period - Repayment Terms Market-based loan with a spread of 40 basis points 25 years 5 years Payable in 40 semiannual installments commencing December 2002 9. Terms of Relending (if any) Not stipulated 10. Interest Rate for Subloans Market-based rates acceptable to the Asian Development Bank 11. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval NHB 31 December 1997 23 December 1999 24 months HUDCO 31 December 1997 6 December 1999 24 months HDFC 24 December 1997 26 January 2001 37 months Effective Date Original Closing Date Time Interval NHB 12 December 1997 30 June 2003 66 months HUDCO 11 December 1997 30 June 2003 66 months HDFC 11 December 1997 30 June 2003 66 months (v) b. Amount ($ million) Category

Original Allocation Last Revised Allocation Net Amount Disbursed Undisbursed Balance 1. Project Expenditure 300.00 300.00 300.00 0.00 2. Imprest Account 0.00 0.00 0.00 0.00 Total 300.00 300.00 300.00 0.00 C. Implementation Data 1. Number of Subloans 300 2. Distribution of Subloans by Component Component Number of Subloans Amount ($ million) A. NHB: Lending through: 1. Part A : a. Government Cooperatives b. Housing Finance Companies Subtotal (A) 16 70 86 43.56 56.44 100.00 B. HUDCO: Lending through 1. Part A: a. Government Cooperatives b. NGOs/CFIs c. Corporations and Municipalities Subtotal (1) 2. Part B: a. Slum Improvement Projects b. Workshed-cum-Shelter Projects Subtotal (2) Subtotal (B) 67

23 83 173 21 1 22 195 35.28 1.68 56.24 93.20 6.78 0.02 6.80 100.00 C. HDFC: Lending through 1. Part A: a. Government Cooperatives b. Companies c. Corporations and Municipalities d. Directly to Households Subtotal (C) 3 5 10 1 19 12.76 32.75 16.77 37.72 100.00 Total 300 300.00 NGO = non government organizations, CFI = community-based finance institutions. (vi) 3. Project Performance Report Ratings Ratings Name of Institution Implementation Period Development Objectives Implementation Progress NHB Nov 1998–Feb 1999 S S Mar 1999–Dec 2002 HS HS

HUDCO Nov 1998–Feb 1999 S S Mar 1999–Dec 2002 HS HS HDFC Nov 1998–Feb 1999 S S Mar 1999–Dec 2002 HS HS S = satisfactory, HS = highly satisfactory D. Data on Asian Development Bank Missions Name of Mission Date No. of Persons No. of PersonDays Specialization of Members a Fact-finding 22 Apr–7 May 1999 8 112 h, g, c, I, b, i, o Appraisal 17–31 Jul 1997 5 75 h,g,j,I,n Inception 19–29 Jan 1998 4 44 h,I,k Project Review 1 12–22 Oct 1998 2 22 b,I Project Review 2 1 Dec 1999–23 Feb 2000 2 I,g Disbursement Review 1 6–18 Mar and 4–5 Apr 2000 2 30 f,I Disbursement Review 2 24 Jul–10 Aug 2000 2 36 f,g Disbursement Review 3 10–16 Jan 2001 2 16 f,I Disbursement Review 4 26 Feb–10 Mar 2001 2 18 f,l Disbursement Review 5 3,11–12 Apr 2001 1 3 f Disbursement Review 6 23–25 May 2001 1 3 f Audit Review 1 4 Jun–8 Aug 2001 2 78 I, m Disbursement Review 7 27 Jun–9 Jul 3 27 f, b,g a a-engineer, b-financial analyst, c-counsel, d-economist, eprocurement/consultant specialist, f-control officer, g-programs officer, h-environment specialist, i-staff consultant, j-urban development specialist,

k-Assistant operations analyst, l-staff consultant, m-auditor, o-resident representative, India Resident Mission. b This Project Completion Report was prepared by M. Ravi, Financial Officer; Tanuka Endow, Consultant; and assisted by Michael Gomes, Senior Administrative Assistant, India Resident Mission. I. BACKGROUND A. History 1. The National Housing Bank (NHB) was established in July 1988 as the apex body for the housing finance sector. NHB is wholly owned by the Reserve Bank of India (RBI), the central bank. NHB's three primary responsibilities are to (i) mobilize resources for the housing sector, (ii) promote the development of housing finance companies (HFCs), and (iii) regulate their operations. 2. The Housing and Urban Development Corporation Ltd. (HUDCO) was incorporated in April 1970 as a wholly government-owned company to promote housing and urban development, particularly for low-income and economically weaker sectors. HUDCO is registered under the Companies Act as a public limited company and managed by a government-appointed board of directors. HUDCO’s operations are divided between housing and infrastructure finance, mainly through state and local agencies, with some direct assistance to individuals under the HUDCO Niwas scheme besides assistance to some privately sponsored projects. HUDCO is mandated to lend at least 55% of its funds to low-income and economically weak sectors. 3. The Housing Development Finance Corporation Ltd. (HDFC) was established in 1977 as a public limited company to provide housing finance to individuals. As the first private HFC, its operations grew rapidly and it continues to be the market leader in the retail housing finance sector despite the emergence of a number of HFCs. 1 B. Scope of Operations 4. As a housing finance promoter, NHB financially supports HFCs and facilitates access to

institutional credit. NHB provides refinancing to 31 HFCs, commercial banks, and cooperative sector housing finance institutions (HFIs). The bulk of NHB’s assistance is in the form of refinance to eligible primary HFIs in the public, private, and cooperative credit sector. As a housing finance regulator, NHB sets prudential norms for capital adequacy ratio (CAR), income recognition, asset classification, and provisioning on HFCs’ nonperforming assets. In January 1999 the NHB board approved a new refinancing scheme for community-based financial institutions (CFIs) under which any approved institution, mainly HFCs, can avail themselves of refinance for loans made to CFls. To augment sector resources, NHB has issued a number of mortgage-backed securities (MBS). In collaboration with Canada Mortgage Housing Corporation, NHB promoted a mortgage credit guarantee company for which the Asian Development Bank (ADB) has approved equity assistance. 2 5. HUDCO provides credit for housing and infrastructure development through government and privately sponsored projects; develops and disseminates low-cost and ecofriendly construction technology; builds capacity in the sector through training, research, and consultancy; helps implement housing and urban infrastructure projects secured by state government guarantees; and assists privately sponsored projects. With the emphasis on fiscal reforms in the recent years, the ability of the states to provide guarantees has been constrained, thus limiting state-guaranteed assistance by HUDCO. Its direct lending window to individuals is a recent response to these changes. 6. HDFC has promoted home ownership by providing finance through a wide variety of products. Besides giving direct loans to individuals, which account for most loans (73% by FY2002), HDFC has also added to housing stocks through loans to corporations and state 1 ADB. 1995. PCR for the Karnataka Urban Infrastructure Development Project. 2

ADB. 2002. India Mortgage Guarantee Company for $10 million under the private sector window. 2 agencies. Its associates include property management, credit-rating, consumer finance, infrastructure finance services, asset management, insurance, and commercial banking companies. C. Relationship with ADB and Other Lenders 7. The Project was the first loan to HUDCO and NHB. ADB had provided a loan of $20 million to HDFC under the Karnataka Urban Infrastructure Development Project, 3 which targeted lending for low-income housing and slum improvement. ADB has supported technical assistance (TA) for capacity building 4 In October 2001 ADB also approved TA to assess the . role of MBS 5 . 8. Other external assistance for the housing finance sector comes from Germany, Japan, Netherlands, United Kingdom (UK), United States, and World Bank. Germany has extended several lines of credit through Kreditanstalt fur Wiederaufbau (KfW) to HUDCO and HDFC for low-income housing and rural building centers throughout the country. HDFC has also received UK funds and assistance from the United States Agency for International Development (USAID) under its Housing Guarantee Program. NHB borrowed $25 million of an authorized $40 million from USAID to expand refinancing operations. USAID, under its financial institutions reforms and expansion (FIRE) program provided HUDCO with $125 million. Japan provided NHB $250 million. 9. International funds constitute 6-7% of the total resource needs of HUDCO and HDFC, and about 12-15% of NHB’s. The main sources of NHB and HUDCO funds include domestic bonds/debentures subscribed mainly by local banks/institutional investors, some of which enjoy fiscal/regulatory incentives. By contrast, HDFC relies significantly on public deposits (45% of

total funding requirements) and domestic borrowings from banks and financial institutions (about 48%). D. Relevance of Design and Formulation 10. The Government gives priority to expansion of low-income housing as the country has a housing shortage. The housing sector requires an enabling environment to mobilize investment. India’s Ninth Five-Year Plan (1997-2002) identified housing and housing finance as a priority. At the request of the Government, in September 1997 ADB approved the first housing finance project to help India achieve the long-term objectives of the National Housing Policy. The $300million project was approved for implementation through three national HFIs: NHB, HUDCO, and HDFC. 11. The ADB loan was considered when the Government was introducing policy reforms and legislative changes that would release land for development and improve the efficiency of housing markets. The Project was designed to pursue ADB’s human development goals by undertaking the following: (i) expand the volume of financial resources available to the sector, especially to meet the needs of low-income groups, (ii) catalyze the development and use of new financial instruments and procedures that will give the poor greater access to credit, and 3 ADB. 2002. India Mortgage Guarantee Company . 4 ADB. 1997. Technical Assistance to India for Strengthening Housing Finance Institutions and Restructuring State Level Housing Institutions. 5 ADB. 2001. Technical Assistance to India for Assessing the role of Mortgage backed Securities. 3 (iii) support and quicken the pace of policy reform sector-wide, to induce greater efficiencies. The Project was conceived to ensure participation of formal agents in housing finance, informal agents such as nongovernment organizations (NGOs) and CFIs, besides involvement of the government and beneficiaries. The Project sought to integrate the formal and informal housing

finance mechanisms, channel funds to low-income households (LIH) and strengthen the housing finance sector and widen its outreach under three components: (i) lending through CFIs, HFIs, companies, and households (part A), (ii) lending for slum improvement and lowincome housing projects (part B), and (iii) equity to new and existing HFCs (part C). E. Related Technical Assistance 12. The Project does not have an attached TA. However, ADB has approved, concurrently with this Project, two advisory TAs and one small-scale TA (para. 7). II. IMPLEMENTATION A. Lending Policies 13. NHB’s lending policies have evolved over the years in response to the transformation of the Indian financial sector from a regulated to a more market-oriented one. Commercial banks have been increasing their housing finance portfolio recently, and the institutional infrastructure for it has been expanding significantly. Market forces and falling interest rates have compelled NHB to be more nimble in responding to market indicators and altering its terms of refinance. The agency has introduced MBS issues, a market-oriented intervention to raise funds. HUDCO’s housing and urban infrastructure assistance mainly support government-sponsored and -guaranteed programs, but the agency has recently opened a direct lending window for retail clients. HDFC’s corporate objective is to provide market-based loans for home ownership. The agency continues to be commercially oriented, adopting a customercentered approach and improving operational efficiency and use of technology. B. Characteristics of Subloans 14. The Project was designed with three broad components: (i) Part A: Lending through CFIs, HFIs, companies, and households. This component provides for finance through: (a) government-supported CFIs such as cooperative housing societies and cooperative rural development banks and HFIs, (b) nongovernment CFIs such as thrift and savings societies organized voluntarily, and (c) direct lending to households or large private companies for workers’ housing needs. (ii) Part B: Lending for slum improvement and LIH projects. Designed to have participation of the benefiting community, local authorities, private sector, and borrowers, this part comprises three types of subprojects: slum networking, workshed-cum-shelter, and enhanced productivity-cum-shelter for LIH to establish homebased business or income generating activities.

(iii) Part C: Equity to new and existing HFCs. This component was intended to expand the housing finance system. ADB did not allocate funds for this purpose, but NHB, using its own funds, was to help refinance at least eight HFCs. 15. The project funds were fully utilized by the three borrowers to lend through multiple channels (Appendixes 1-3). Under part A, the three borrowers together lent $293 million through various channels: (i) cooperative societies ($91 million), (ii) state governments, municipal bodies and local authorities ($73 million), (iii) privately or publicly owned corporations ($33 million), (iv) 4 nongovernment CFIs, thrift societies or groups ($2 million), (v) HFCs ($56 million), and (vi) directly to individuals ($38 million). Against the target of 50%, 62% of project funds were lent to low-income groups. The Project assisted a variety of initiatives to enable beneficiaries to own their homes. Loans through cooperative housing societies helped individuals build their own houses and were generally demand induced. Loans through housing boards, slum improvement boards, and municipal/local authorities were supply driven, with the subborrower usually implementing government-sponsored schemes to build shelter for subsequent allotment and, on occasions, to relocate a slum. Loans to private corporations were to create housing stocks to house subborrowers’ employees. One of the subloans was to rehabilitate people affected by a large dam. 16. The target under part A has been exceeded by $33 million, with a corresponding underachievement under part B. Under part A, lending to cooperatives was more than estimated, by $16 million, and that to companies, municipalities, HFCs and households, by $35 million. Lending through CFIs/NGOs, however, has been short of expectations by $18 million, with the entire assistance channeled through HUDCO, since HDFC preferred to use cheaper KfW sources and internal accruals. 17. Under part B, $6.8 million was channeled to slum improvement and workshed-cumhousing schemes against the target of $40 million. Slum improvement has traditionally been funded with state resources or with institutional funds channeled through state agencies and

guaranteed by state governments. The Project aimed to use a new approach—a participative process among the various stakeholders—to upgrade slums. However, HUDCO routed the entire assistance under the component through traditional channels, while HDFC did not onlend any funds for such schemes. The subprojects typically involved construction of alternate dwelling units for squatters, and basic infrastructure such as water, drainage, sanitation, etc. As the Project was implemented, it became clear that more promotional efforts are required before we can realize the potential benefits of participative process. Effective and bankable slum networking subprojects that could have been assisted were lacking. Even the oftcited Ahmedabad slum networking project did not produce the originally envisaged outcome, with the community’s contribution not as estimated. Even this limited contribution from the community was met without recourse to loans from mainstream financial institutions such as HUDCO, HDFC, etc. 6 18. Under part C, NHB has, on its own, been expanding the institutional sources of housing finance through selective equity support and refinance to HFCs. The number of NHB-approved HFCs increased to 31 from 25 when ADB approved the Project. The HFCs together disbursed an estimated Rs150 billion during FY2002 (Rs.46 billion during FY1997). NHB’s initiatives in setting up the first mortgage guarantee company and supporting MBS issues are other efforts to expand and strengthen the housing finance system. 19. Subprojects assisted were to meet the cost of 219,449 units against estimates of 360,000 in the report and recommendations of the President (Appendix 2). Although the absolute numbers fall short of estimates, the share of low-income groups (87%) exceeded expectations (75%). Considering the close linkage between asset ownership and eventual improvement of human welfare, the loan helped improve LIHs. The Project was expected to result in leverage of investment up to four times. Based on project costs as estimated by the borrowers, the leverage varied from 1.3 to over 2.3.

7 However, these do not include expenses for land and substantial additional investments by beneficiaries to improve facilities, which were 6 ADB. 1999. Technical Assistance to India for Strengthening Microfinance Institutions for Urban Infrastructure Finance. 7 ADB reimbursed 100% of the loans given by the borrowers. Had ADB restricted the refinance level, the Project would have delivered even higher leverage. 5 funded by personal savings and informal credit. Reckoning these additional investments and expansion in credit facilitated by the increased number of NHB-approved HFCs and development of MBS, effective leverage would be much higher. 20. Five states (Tamil Nadu, Kerala, Maharashtra, Gujarat, and Andhra Pradesh) accounted for over 85% of loans (excluding those coursed through the HFCs and a small part of the retail portfolio for which data were not readily available) (Appendix 1, Table A1.3). This pattern mirrors loan distribution by HUDCO and indicates proactive state sponsorship of, and support to, housing programs. Even HDFC reflects this pattern although the agency’s retail portfolio is heavily concentrated in Maharashtra. The Project encouraged lending to reformoriented states, which may partly explain this phenomenon. 21. Recovery rates of subloans varied based on the delivery channel and character of the subproject. For about one third of the loan amounts channeled by HDFC or NHB through HFCs directly to individuals and corporations, recovery rates from the ultimate beneficiaries were very good. 8 The Project also included a third of the funds lent through cooperatives, with an implied/overt government guarantee to the borrowers. The review missions 9 noted that recovery was unsatisfactory, varying from 5% to 80%, depending on states’ forbearance and prevalence of alternative subsidized state programs that discouraged timely debt servicing. About 28% of

the funds were lent for schemes initiated by the state governments, local or municipal authorities, where repayment to the borrowers had an implied government guarantee. The schemes were for a variety of purposes. Loans to the state government were usually for house building advances for staff, who usually repaid from their salaries. Other schemes were dwelling units built by state or local bodies, which were sold under outright purchase or hire purchase or lease schemes. Recovery performance under these schemes is inconclusive due to insufficient data. C. Implementation and Internal Operation of Subprojects 22. The loans were quickly disbursed to all the borrowers within the first 3 years of implementation (Appendix 5). The borrowers adopted the imprest account procedure and submitted all claims under the statement of expenditure (SOE) procedure for liquidation and replenishment. Subsequent SOE and project review missions, however, found that the borrowers did not adequately follow ADB implementation guidelines. A number of claims were ineligible mainly due to inclusion of subloans disbursed before the date of effectiveness, and sometimes due to inadequate supporting documents. The borrowers, who were implementing an ADB project for the first time, were not familiar with ADB procedures and documentary requirements. Funds reach the ultimate beneficiaries through a number of intermediaries, on whom the borrowers normally rely to keep records of loans. The borrowers’/subborrowers’ record-keeping system did not always separately identify ADB-funded subprojects. State government guarantees on subloans resulted in slack record keeping and information feedback. In case of direct loans to the ultimate beneficiaries or to NGOs/nongovernment CFIs, however, due diligence during the entire approval and monitoring process was satisfactory and in line with internal procedures. Based on the subsequent feedback from the borrowers, ADB approved substitutions of ineligible subloans with eligible ones. 23. Direct loans to individuals and HFCs are generated from the demand side and, hence,

generally completed. HUDCO has reported that about 86% of the planned dwelling units are completed, as substantiated by sample reviews of cooperative housing finance schemes by 8 HDFC’s nonperforming loans (NPLs) has been consistently very low at about 1%. Assisted by NHB, HFCs also had good recovery rates, with NPL below 3%. 9 ADB review missions were fielded on 12-22 October 1998, 1 December 1999-23 February 2000, 6-17 March 2000, 24 July-10 August 2000, 26 February-10 March 2001, 23-25 May 2001, etc. 6 ADB missions, random audit missions, and staff consultants. Subloans for slum improvement/housing schemes by slum improvement/housing boards/other authorities are generated from the supply side. Sometimes these schemes are hampered by resistance from slum dwellers. Implementation of such government-sponsored schemes also suffered from poor financial state of the agencies and absence of accountability. Of the 3,604 dwelling units planned under the slum improvement schemes, 1,741 were completed and 1,419 are in progress. Sometimes the houses were not allotted due to poor demand. Overall, many assisted projects have been successfully implemented. All the dwelling units are subject to local regulations and development rules. Lenders such as HDFC and other HFCs generally ensure conformity to such regulations before disbursements. D. Operational Performance of the Borrowers 1. Organization, Management, and Staffing 24. NHB is managed by a board of directors comprising nominees from RBI; central Government (ministries of finance, urban development and poverty alleviation, and rural development); and state governments; and other professionals from finance, architecture, and housing sectors. NHB’s staff strength, including professionals equals 80 (Appendix 6, Table A6.1). HUDCO is managed by a board of government nominees and governmentappointed professionals (Appendix 6, Table A6.2). With a staff of 1,142, including 627 executives, HUDCO

has its corporate office in Delhi with 33 other offices. HDFC is a joint stock company listed in the stock exchanges and managed by a team of professionals under the supervision of a board of directors. The agency has a network of 118 offices and 1,029 employees, including professionals such as engineers, architects, lawyers, and financial specialists (Appendix 6, Table A6.3). 2. Personnel Administration 25. NHB staff include professionals from diverse disciplines such as economics, finance, law, civil engineering, urban/town planning, architecture, business administration, chartered accountancy, banking, computers, and information technology. NHB conducts human resource development programs regularly to upgrade staff skills to meet market needs. HUDCO develops human resources through regular training programs. During FY2002, 470 employees were nominated for staff development programs in India and abroad. HDFC, a professionally wellmanaged organization with a pool of committed, qualified staff from various disciplines, offers market-related compensation for its staff. HDFC revises its human resource development policies and compensation package periodically to meet market needs and staff aspirations. 3. Lending Operations 26. NHB regulates, promotes, and financially helps the housing finance industry. NHB’s lending programs include refinance of individual housing loans (in urban and rural areas, through HFIs and HFCs), project loans, rental housing schemes, slum upgrading, and offsite/on-site infrastructure development. NHB routes its financial assistance through a wide range of intermediary retail institutions such as HFCs, scheduled banks, cooperative banks, regional rural banks, agriculture and rural development banks, apex cooperative housing finance societies, and CFIs. Thirty-one HFCs, with a network of more than 650 branches across the country and accounting for over 95% of HFCs’ market share, are approved for refinance by NHB. In its appraisal of HFCs, NHB includes assessment of their conformity to financial parameters, prudential guidelines, track record of repayments, 10

etc. As of FY2002 NHB’s cumulative refinance to HFCs, commercial banks, and cooperative finance institutions 10 Maintenance of a minimum CAR of 12%, liquid assets at least at 10%, minimum net owned funds of Rs100 million, and maximum net NPL of 5% are some of the parameters.7 amounted to Rs72.51 billion, with most (76%) going to HFCs (Appendix 7). Although limited in quantum (Rs1.97 billion as of FY2002), NHB directly finances land development and shelter, housing infrastructure, and slum redevelopment projects. NHB’s support for mortgage securitization has helped float five MBS issues, so far mobilizing Rs3.60 billion. 27. HUDCO’s cumulative approvals and disbursements up to FY2002 aggregated Rs420.12 billion and Rs293.34 billion, respectively, covering 13.12 million dwelling units, over 4.88 million sanitation units, and 1,915 infrastructure schemes (Appendix 7). HUDCO’s outstanding portfolio consists predominantly of government-guaranteed loans to government departments/agencies (92%), with the balance to private sponsors/individuals. HUDCO assistance is for urban/rural housing, staff quarters, repairs/renewals, night shelters, private builders’ projects, NGO/CBO schemes, and retail mortgages. Urban infrastructure finance is for land acquisition and development, sanitation, slum improvement, utility infrastructure, social infrastructure, and economic and commercial infrastructure. 28. Most of HDFC’s operations consist of retail mortgages. The agency has devised a variety of loan structures to suit varying needs. HDFC also lends to corporations for their employees’ housing credit needs although this is not a significant part of its portfolio. HDFC’s cumulative approvals and disbursements by FY2002 reached Rs401.36 billion and Rs335.70 billion, respectively (Appendix 7). Though limited in quantum, HDFC also lends through CFIs/NGOs. HDFC has developed transparent procedures for loan processing, with emphasis on assessing creditworthiness and repaying capacity. Before disbursement, HDFC ensures conformity to local development regulations and rules.

4. Other Operations 29. Other NHB operations include: (i) regulating and supervising about 350 HFCs – it issues prudential norms relating to income recognition, asset classification, capital adequacy, asset liability management, etc., and (ii) promoting and developing the housing sector by guiding investment to it by interacting closely with the Government to articulate and influence policy. NHB’s promotional initiatives include TA to sector participants, development of the MBS market, etc. HUDCO’s developmental role comprises support for technology dissemination in housing construction; research and training in capacity building for agencies; consultancy services for housing, urban development and infrastructure, and so on. HUDCO’s Human Settlement Management Institute provides training, research, and consultancy. Besides focused credit delivery in housing finance, HDFC has undertaken a number of finance initiatives through its associate companies in infrastructure finance, credit rating, credit information services, consumer finance, commercial banking, property management, asset management, trusteeship services, and insurance. E. Borrower’s Financial Performance 30. NHB, being primarily a refinance institution, has a small loan book. NHB’s disbursements increased from Rs5.3 billion in FY1998 to Rs11 billion in FY2002. Significantly, the pace of growth in NHB’s operations has slackened from an annual growth of 45.3% in FY1999 to 5.4% in FY2002, reflecting the decline of refinance as a support mechanism in an increasingly market-oriented industry. HDFC registered consistent growth in loan approvals and disbursals. With an annual average growth of 29.3% over the last 5 years, HDFC’s approvals increased from Rs32.5 billion in FY1998 to Rs90.4 billion in FY2002, resulting in growth of outstanding portfolio to Rs171.7 billion by FY2002. HUDCO’s operations, which registered consistent growth in loan approvals up to FY2000, fell significantly in FY2001 but recovered somewhat during FY2002 with an approval of Rs81 billion. This trend is also reflected in

HUDCO’s disbursements, which grew only very modestly over the last three years. HUDCO’s loan book composition has changed recently, with the share of housing falling from 60% to 39%, 8 and the share of urban infrastructure increasing. While HDFC has consistently had a high proportion of disbursement to approval (around 84% over the last five years), this ratio has been low for HUDCO and has fluctuated considerably year by year. F. Financial Statements and Ratios 31. NHB’s assets steadily increased in FY1998–2001, indicating the industry’s growth and demand for refinance (Appendix 8), but growth slowed down in FY2002. In recent years, interest rates have become increasingly market determined, and institutional infrastructure has been expanding, unleashing competitive forces. In response, HFIs and banks resort to refinance only at the margin. Development of the MBS market has also reduced the importance of NHB’s role as a provider of finance. NHB’s borrowings have not exhibited any significant trend, although reliance on RBI support has been reduced, and that on multilateral sources and priority sector bonds has increased. NHB’s reserves have grown steadily with regular plough back of profits, which were consistent in FY1998–2001 but declined in FY2002, primarily due to withdrawal of NHB’s tax-exempt status. The return on average equity and average assets went up until FY2001 but declined in FY2002. NHB’s CAR of 20.2% for FY2002 was well above the regulatory minimum. NHB is regulated by RBI and follows its guidelines for provisioning and write off. NHB’s debt-equity ratio was 4.5, and NPL ratio 0 for FY2002. NHB’s asset liability management is in accordance with RBI norms and reflects adequate liquidity in short-term buckets. 32. HUDCO’s assets grew steadily in FY1999–2002, although more slowly than in recent years (Appendix 9). Growth has been funded by equity infusion from the Government and increased issue of bonds, which have been enjoying good credit rating due to implied government support. Recently, however, bonds have been downgraded due to the strained

financial position of some of the state governments to which HUDCO is exposed. During FY1998–2002 HUDCO’s reserves also grew, although if arrears in provisioning were reckoned, growth would be lower. HUDCO’s profits increased during FY1998–2001 but declined in FY2002. With the backlog in loan loss provisions, the adjusted bottom line would reflect losses. HUDCO’s financial ratios reflect declining performance since FY2001. HUDCO’s CAR at 9.49% for FY2002 is below the regulatory minimum of 12%. Although governed by prudential norms laid down by NHB, HUDCO has not made adequate loan loss provisions. The statutory auditors and ADB review missions have observed that HUDCO does not receive confirmation of outstanding balances from most of its borrowers. The missions have also observed that HUDCO lends against government guarantees. HUDCO’s performance has been affected by delays/defaults in payment by some state agencies. Going by the inadequate provisioning disclosed in financial statements, HUDCO’s recovery performance has not been satisfactory. 33. HDFC’s assets have grown robustly at an average annual rate of 21.66%, reflecting the growth in the mortgage loan market (Appendix 10). Notwithstanding the pressures of competition, HDFC’s profits have increased continuously, resulting in accretion to its reserves, which have grown at an average annual rate of 11.4%. Return on equity recorded continuous increases while maintaining a constant return on average assets. HDFC follows the regulatory norms laid down by NHB for provisioning and write off. HDFC’s recovery has been consistently healthy, with an NPL ratio of about 1%. The debt-equity ratio, which increased from 5.00 in FY1999 to 6.69 in FY2002, was within healthy limits. HDFC’s book value and earnings per share have been consistently healthy. CAR has been above the minimum required 12.0% (14.5% in FY2002). G. Covenants 34. All the three Borrowers have generally complied with most loan covenants (Appendix

11). Some of the measures under institutional action plans were not fully complied. In particular,9 these agencies did not take effective and sufficient steps to improve cooperative financial institutions. HUDCO and NHB did not submit audited statements to evidence compliance with some of the financial ratios. HUDCO has not complied with the required debt service coverage ratio for some of the years. None of the borrowers submitted benefit monitoring and evaluation reports or maintained separate records on bulk loans through intermediaries funded out of ADB. While the borrowers provided ADB with certified copies of the audited accounts and financial statements, auditors’ reports relating to loan utilization and compliance with covenants were irregular and provided only after reminders from ADB officials. H. Performance of the Asian Development Bank 35. The Project was the first ADB intervention in the Indian housing finance sector. The Project’s efficient administration was somewhat affected by the steep learning curve with respect to institutional delivery system, intermediaries’ procedures and practices and ADB loan requirements. ADB allowed flexibility in reaching targeted beneficiaries through alternate delivery channels. Initial review missions were restricted due to administration in headquarters but were facilitated once the loan was delegated to the India Resident Mission. The audit by the ADB team showed how a few subloans were ineligible. Dispensing with prior ADB subloan review proved counterproductive as resources later had to be deployed to replace ineligible subloans. Closer ADB involvement before full disbursement would have allowed better utilization of assistance to targeted beneficiaries and improved recording of program benefits. ADB, however, enhanced its subsequent due diligence with more field and SOE reviews. III. EVALUATION A. Loan Appraisal 1. Distribution of Subloans 36. Under part A of the Project, actual funds deployed and the number of beneficiaries broadly met project estimate. The targeted share of funds deployed for lowincome housing

was exceeded by a wide margin, and the share of low-income beneficiaries was higher than project estimates. Under the various subcomponents, the Borrowers’ performance met project expectations, except in case of CFI/NGO lending channel estimates. Various ground-level realities pose problems for lending to the CFI/NGO sector, which the ADB Review Mission listed: (i) lack of adequate collateral, (ii) CFIs’/NGOs’ lack of knowledge of financial operations, (iii) rigid appraisal systems with emphasis on security rather than the servicing capacity of the borrower, and (iv) lack of imagination in devising flexible but commercially viable loan structures. NGOs/CFIs are also seen as being high-risk borrowers because of the discontinuous and uncertain income streams of the ultimate beneficiaries. 37. Under part B, slum improvement and low income housing projects projects were to be carried out under three kinds: (i) slum networking, (ii) workshed-cum-shelter, and (iii) enhanced productivity-cum-shelter. Innovation in slum networking subprojects were also expected to rectify drawbacks of the traditional approach, which did not involve beneficiary consultation in planning and implementation, and suffered from lack of ownership, since the assistance was considered free and the beneficiary not assured tenure. The assumption that the Project would be able to reach the poor through slum networking proved unrealistic. Even HUDCO, which is mandated to take up programs to meet the housing needs of low-income groups and economically weak sectors, could not meet project estimates. For the commercially oriented HDFC, slum networking and assistance through NGOs/CFIs posed too many risks. NHB’s scheme for lending to CFIs/NGOs through HFCs, although conceived long ago, has not elicited any response from them, which, like HDFC, lend on commercial principles. 10 38. Another possible reason behind underachievement in this area is the prevalence of several government housing schemes for the poor funded by budgetary provisions. ADB’s experience under another project, 11 which experimented with pilot projects to upgrade slums

through a similar participative process, indicates that slum communities and even CFIs are unwilling to borrow to develop community infrastructure but that demand for loans for individual connections rises once the infrastructure is in place. This Project also confirmed review mission findings that collateral requirements, bureaucratic procedures, absence of land tenure, etc. are the stumbling blocks to procuring institutional funds to upgrade slums. Despite the inefficiency of government-sponsored rural housing schemes, their very availability discourages the demand for credit-linked schemes. HUDCO, however, has lent for slum improvement projects and lowincome housing through loans to slum development boards. Although it did not use the ADB loan to lend to CFIs/NGOs, HDFC has been lending to them under its KfW line of credit, which carry lower rates of interest than ADB’s loan. Under three KfW lines of credit, HDFC financed over 90,000 dwelling units with loans totaling Rs1 billion until FY2002. HDFC finds that high cost of ADB funds and lack of adequate collateral restrict lending to slum improvement projects. 39. The borrowers have attempted to improve housing delivery, expand housing finance system, and increase the availability of housing finance by leveraging public and private sector capital. Since 1997 NHB registered six more HFCs as eligible for refinance. NHB’s equity investment in HFCs aggregated Rs151 million by FY2000. Housing finance growth is reflected in NHB’s refinance assistance and MBS floated in recent years. NHB has issued a number of MBS and also promoted a mortgage credit guarantee company for which ADB has approved equity assistance. All the borrowers have reached out to low-income groups. 40. Since 1997 the Government has initiated many legislative and policy reform measures, which are expected to encourage private sector investment in housing. The repeal of the Urban Land Ceiling Act, amendment of the Rent Control Act, and amendment of the NHB Act to facilitate foreclosure on defaulting loans and to lower stamp duties in some states are examples of such measures, although regulatory/legal reforms at the provincial level need further action.

Training and outreach programs by HUDCO and NHB to build capacity in the cooperative housing sector and HFIs have not been sufficient in significantly improving their performance. 2. Covenants 41. While the borrowers complied with most covenants, some of the project expectations were not reflected in the loan agreements, thus limiting ownership of achieving such expectations. The Project would have achieved higher leverage with a covenant stipulating higher share of borrowers in the project cost. ADB should conduct an outreach program to explain to the borrowers, ADB’s benefit monitoring and evaluation requirements. 3. Quality of Appraisal 42. NHB and HDFC follow stringent appraisal methods and on-lend only after ascertaining the beneficiaries’ creditworthiness. NHB has listed eligibility criteria and prudential norms that HFCs must fulfill if they want refinance (footnote 10). HDFC also strictly ascertains beneficiaries’ eligibility. HUDCO has a standard and well-established set of guidelines for loan appraisal. While these procedures are followed for technical evaluation, ADB review missions have observed that certain other guidelines are sometimes not observed. To meet government targets for providing housing to the poor, HUDCO has relied on implied/overt guarantee of state governments without strict financial appraisal. Although HUDCO had a system of internally rating the intermediary institutions, the rating often did not reflect the current financial position of 11 ADB. 1999. Technical Assistance to India for Strengthening Microfinance Institutions for Urban Infrastructure Finance. 11 the institutions due to backlog in finalization of accounts, and audit. Appraisal and monitoring procedures of loans through NGOs/nongovernment CFIs were based on professional assessment of the borrowing organization’s capacity and implementation progress, perhaps because they were not supply driven or supported by government guarantee. 43. ADB adequately assessed the economic situation and housing finance sector. ADB’s

assessment of the roles of DFIs and their ability to channel project funds was generally satisfactory. However, monitoring procedures of executing agencies, particularly HUDCO, should be assessed more in-depth. B. Implementation 44. ADB disbursed the loan amount quickly, within the first three years of implementation under the imprest account procedure and SOE procedure for liquidation and replenishment. To hedge the foreign exchange risks of ADB funds, all three borrowers entered into specific transactions with financial sector participants such as commercial banks and the Export-Import Bank of India. These transactions involved deposit of foreign currency funds under the Project with the counterparts against rupee loans/ subscription to rupee bonds by these counterparts at market-determined rates of interest. Debt servicing under such bilateral deals coincided exactly with interest payment dues and amortization schedules under the ADB loan. 45. The SOE threshold, which was too high for a typical housing loan, deterred a closer review in the early stages, leading to quick approval of most loans without the required screening. The SOE format should be modified to capture information for a better review of subloans and their benefits. ADB’s procedures and objectives should be known early on in a project, and project quality improved at entry to avoid problems of the kind experienced when ineligible subloans had to be substituted with eligible ones. The subborrowers were sometimes found to be late in on-lending to the ultimate beneficiaries. Although most of the projects were implemented, a more intensive screening early on could have prevented the interruptions to smooth project implementation. IV. ASSESSMENT AND RECOMMENDATIONS A. Relevance 46. Expansion of mortgage credit and institutional infrastructure for housing finance continues to be a priority. The Project, designed to channel ADB resources through the three national institutions, was appropriate for extending resources to low-income housing. The

Housing Finance II Project, which was approved subsequently to purvey credit to low-income housing, is now under implementation, thus confirming the relevance of the Project. The experience points to the need to channel funds through a demand-induced mechanism rather than support supply-driven or government-sponsored measures, which do not encourage cost recovery. 47. The Project is relevant to the Government’s objective to improve slums. However, integration of CFIs/NGOs into mainstream financial institutions has not been successful. While NGOs/CFIs can motivate beneficiary participation, a number of changes have to precede mainstreaming of CFI/NGO efforts: (i) simplifying lending procedures, (ii) relaxing collateral requirements, (iii) building capacity of CFIs/NGOs and major HFIs, and (iv) ensuring land tenure. While able to articulate the need of the poor for housing finance, NGOs/CFIs have not made financial proposals sufficiently bankable. Besides, government subsidized/free schemes 12 deter a commercial approach to mortgage credit. CFIs/NGOs, therefore, cannot yet take the place of government agencies in slum improvement and low-cost housing. 12 B. Efficacy in Achievement of Purpose 48. The Project was reasonably successful in improving access to housing finance by the poor, to whom 62% of ADB funds, against the target of 50%, were channeled. Slum-upgradation subprojects were undertaken through traditional government channels and did not meet project expectations of an innovative participative approach involving nongovernment CFIs/NGOs . The Project was also unsuccessful in integrating informal channels into the mainstream financial system. 49. The Project provided finance to more than 219,449 households and 191,700 LIHs. As lending through the cooperative finance system was concentrated mainly in a few states, the Project achieved limited success in expanding the national cooperative system. With the changing financial architecture and move away from directed to commercial lending, financial

institutions are expected to develop new equations and relationships with the various participants/stakeholders and informal players such as CFIs. Microfinance institutions are expected to have their own niche, and their role is expected to evolve, if slowly. C. Efficiency in Achievement of Outputs and Purpose 50. The Project helped create close to the envisaged number of dwelling units, resulting in significant leveraging of funds from the beneficiaries. Various ADB initiatives (para. 7) to develop alternative sustainable sources of funds, together with this Project and the Housing Finance II Project, have helped expand the mortgage market and introduce MBS. ADB has catalyzed reforms to create quality mortgages and increase the supply of dwelling units. D. Preliminary Assessment of Sustainability 51. The Project adopted multiple channels to expand the housing finance sector. The loan to NHB was channeled through HFCs and the cooperative system. HFCs are commercially oriented organizations regulated by NHB and have adequately recovered the cost of their mortgages. The cooperative finance system, however, is weak in recovery and has poor accounting practices, with considerable backlog in accounts finalization and audit. One important development during recent years is the increasing role of commercial banks in mortgage finance. Another is the slow change in NHB’s refinance composition, with increasing assistance to commercial banks and HFCs rather than cooperative organizations. NHB has been redefining modes of credit expansion by playing a greater role in MBS issues as an advisor and investor. Adapting to market changes will make NHB sustainable in the medium term. 52. HUDCO has been the principal channel to support government-sponsored programs. Government-sponsored schemes, particularly for the poor, suffer from inadequate cost recovery and are administered through the cooperative finance system or state government outfits/local authority. Such schemes are target driven, and the agencies traditionally have not been lending

commercially. As long as state government finances are healthy and budgetary provisions adequate to meet costs, these programs can be sustainable. With economic reforms and recent financial sector liberalization, state governments are moving gradually to contain their fiscal deficit, limiting their ability to guarantee state-sponsored programs. In FY2000 HUDCO started to change its loan asset portfolio by opening a retail-lending window, and is now limiting its 12 ADB. 1999. TA 3344-IND, which include pilot projects based on slumnetworking design supports this conclusion. 13 exposure to states that can provide guarantees. While these initiatives appear to be a response to the environment, HUDCO’s financial operations have been affected by the agency’s bias for government-sponsored schemes, which are not sustainable in the long run due to poor cost recovery. 53. HDFC has operated commercially and adopted a professional approach to appraisal and monitoring of credit proposals. Programs channeling funds through HDFC, with its predominantly retail portfolio and excellent recovery ratio, are sustainable. 54. Programs with clear cost recovery mechanisms are sustainable. Wherever equity considerations compel policymakers choose subsidy, they should adopt a professional approach to cost recovery, with a transparent mechanism to channel subsidies. The Project is sustainable. E. Other Impacts 55. Under its loans to private enterprises, HDFC funded subprojects to build quarters for low-income employees, which improved their and their families’ living, social, and cultural conditions—a state that will continue even after the employees retire. After these employees leave the company, their dwelling units will be allotted to new employees, who will also similarly benefit. F. Overall Assessment 56. The Project’s main objective was to provide shelter to about 360,000 households, by

expanding and strengthening the delivery mechanism, improving linkages between CFIs/NGOs and HFIs, drawing up enabling policy reform, and ameliorating slum conditions through innovative projects for slum improvement and low-income housing. By providing public and private borrowers with diverse delivery channels and approaches to lending, the Project explored various methods to achieve the objective. The Project met its objectives although its sustainability was limited by the subborrowers’ inadequacies in professional financial management and accountability, and by the adverse demonstration effect that state-sponsored schemes had in cost recovery. Sector policy reform has been substantially achieved with the repeal of the Urban Land Ceiling Act, amendment of the Rent Control Act, and amendment of the NHB Act to facilitate foreclosure on defaulting loans, although more state regulatory/legal reforms are needed. The Project achieved limited success in expanding the cooperative finance system with insufficient proactive efforts to expand assistance to hitherto lessserved states. The Project was unsuccessful in establishing linkages between CFI/NGO and HFIs. Overall the Project was successful. G. Lessons Learned 57. Formal agencies hesitate to lend to CFIs/NGOs, which are seen as high-risk borrowers due to the discontinuous and uncertain income streams of the ultimate beneficiaries, lack of security, incapacity of the intermediary, etc. The perceived risk compelled HFIs to be selective in lending through this window. HDFC for instance, has reported 100% recovery in assistance to CFIs/NGOs, but not out of the project funds, suggesting that to meet the large gap in housing for the poor, specialized HFIs with a social mandate, such as HUDCO, are still relevant. However, to sustain such institutions, a transparent mechanism is needed to meet the social costs of such intermediation, and processes and procedures of field-level institutions such as the cooperative societies need to be changed fundamentally. Linkages between CFIs/NGOs

and HFIs for slum networking can be realized only after some of the macro issues relating to state policies on land title, cost recovery, transparency of subsidies, improved governance, and reform of state agencies’ financial management are solved. Other important lessons include the following: (i) a different set of guidelines must be adopted to assess and mitigate risks under 14 CFI/NGO, (ii) high intermediation costs should be recognized, and (iii) intermediaries’ capacity must be upgraded. To maximize the chances of project success, particularly in policy reform and institutional development, the borrowers’ roles need to be clearly laid out and agreed upon formally. To facilitate monitoring and timely response, executing agencies must understand early on ADB’s procedures and feedback requirements. The usually stipulated free and SOE limits are often irrelevant in these kinds of projects where the subloans constitute individual mortgage loans, which are too small ($1,000–10,000) to be above the limits. A format should be devised to capture data during disbursement to better monitor subprojects and facilitate subsequent reviews on a random basis. 58. The Project would have achieved a higher leverage had the borrowers shouldered a higher share of the project cost. The prevalence of subsidized governmentsponsored schemes discourages cost recovery even from those willing and able to repay. Field reviews of some lowincome group schemes revealed many instances of higher investment than estimated by the borrowers, funded by informal sources such as savings, moneylenders, etc. While many such beneficiaries regularly serviced such informal loans, often at usurious rates of interest, repayments to government intermediaries were irregular. H. Recommendations 59. The Government’s policy of increased private sector participation and limiting the Government’s role to creating a conducive environment is appropriate and worthy of continued support. The commercially oriented institutional structure consisting of HFCs and commercial banks provides channels of purveying credit to middle- and high-income borrowers, and

perhaps even to some at the upper end of the low-income category. The cooperative system should be restructured and profefsssionalized to improve financial management, record maintenance, and accountability since the system can better reach rural areas, economically weak sectors, and the poor than HFCs and commercial banks. Subsidy may be necessary for the poorer sections, and should be transmitted in a transparent manner through all institutional channels to promote competition and encourage alternate methods of leveraging the subsidy for larger benefit. 60. Resources should be allocated for continuous monitoring of ADB lending program benefits, and mechanisms established to identify the roles of various project stakeholders. To achieve institutional/policy objectives, borrowers’ roles should be clearly laid out and agreed upon formally. Future projects must ensure that the executing agencies comprehend well and early on ADB’s procedures and feedback requirements. The threshold limits for free and SOE limits and documentation requirements should be relevant to the Project and should be restructured to meet ADB’s feedback needs. Component Estimate AchieveEstimate ment AchieveEstimate ment AchieveEstimate ment Achievement Part A: Lending for Housing to CommunityBased Finance Institutions, Housing Finance Institutions, Companies, and Households Lending through Government Cooperatives 40.00 43.56 25.00 35.28 10.00 12.76 75.00 91.60 20.00 1.68 0.00 Lending through NGOs and CFIs 5.00 0.00 5.00 1.68 10.00 55.00 56.44 45.00 56.24 65.00 87.24 165.00 199.92 Lending through 0.00 0.00 0.00 0.00 0.00 32.75 0.00 32.75 - Companies 0.00 0.00 0.00 56.24 0.00 16.77 0.00 73.01 - Corporations and Municipalities 55.00 56.44 0.00 0.00 0.00 0.00 0.00 56.44 - HFCs 0.00 0.00 0.00 0.00 0.00 37.72 0.00 37.72 - Directly to Households 293.20 100.00 260.00 85.00 93.20 75.00 100.00 100.00 ) Subtotal (Part A Part B: Lending for Slum Improvement and Low6.80 0.00 40.00 0.00 15.00 0.00 0.00 25.00 Income Housing Subprojects

0.00 0.00 Slum Improvement, of which : 0.00 0.00 0.00 0.00 0.00 6.78 0.00 0.00 - Slum Networking 0.00 0.00 0.00 0.00 0.00 0.02 0.00 0.00 - Workshed-cum-Shelter - Enhanced Productivity-cum-Shelter 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 6.80 15.00 0.00 40.00 6.80 Subtotal (Part B) 0.00 0.00 25.00 Part C: Expanding the National Housing Finance System 300.00 300.00 100.00 100.00 100.00 Total 100.00 lopment Corporation Ltd. CFI = Community-Based Finance Institutions, HDFC = Housing Development Finance Corporation Ltd., HUDCO = Housing and Urban Deve LOAN UTILIZATION ($ million) To be carried out by NHB from its own resouces Total HDFC HUDCO NHB Table A1.1: Estimates and Achievements Appendix 1 15 Assistance for LIG Units Assistance for Non-LIG Units Total Assistance Share of LIG Units DFI Number Amount Number Amount Number Amount Number of Funds DUs % (Rs million) ($ million) (Rs million) ($ million) (Rs million) ($ million) % 53.8 67.1 100.0 4,260.5 1,969.0 46.2 46,665 53.8 15,358 2,291.48 NHB 31,307 73.9 95.9 100.0 4,226.6 1,103.6 26.1 140,762 73.9 5,835 3,123.02 HUDCO 134,927 58.5 79.5 100.0 4,253.9 1,764.3 41.5 32,022 58.5 6,556 2,489.59 HDFC 25,466 62.0 87.4 300.0 12,741.0 4,836.9 113.8 219,449 186.2 27,749 7,904.09 Total 191,700 using and Urban Development Corporation Limited, DU = dwelling units, DFI = development finance institutions, HDFC = Housing Development Finance Corporation Limited, HUDCO = Ho LIG = lower income group, NHB = National Housing Bank. Source: Borrowers' reports. Table A1.2: Share of LIG in Total Assistance LOAN UTILIZATION 16 Appendix 1 State NHB HUDCO HDFC Total NHB HUDCO HDFC Total Share (%) Andaman & Nicobar 6.30 6.30 0.15 0.15 0.06 Andhra Pradesh 626.58 294.40 920.98 14.82 6.92 21.75 9.19 Assam 70.08 70.08 1.66 0.00 1.66 0.70 Bihar 50.56 50.56 1.20 0.00 1.20 0.50 Gujarat 642.54 329.08 971.62 15.20 7.74 22.94 9.70 Haryana 95.75 95.75 2.27 0.00 2.27 0.96 Himachal Pradesh 7.23 7.23 0.17 0.00 0.17 0.07

Jammu & Kashmir 13.31 13.31 0.32 0.00 0.32 0.13 Karnataka 58.89 52.72 338.70 450.31 1.38 1.25 7.96 10.59 4.49 Kerala 1,037.55 1,401.51 47.50 2,486.56 24.35 33.16 1.12 58.63 24.82 Madhya Pradesh 74.75 246.20 320.95 0.00 1.77 5.79 7.56 3.20 Maharashtra 170.62 927.14 1,097.76 0.00 4.04 21.79 25.83 10.96 Manipur 0.74 0.74 0.00 0.02 0.00 0.02 0.01 Rajasthan 81.40 332.87 414.27 0.00 1.93 7.83 9.75 4.13 Tamil Nadu 771.79 885.17 1,402.07 3,059.03 18.12 20.94 32.96 72.02 30.53 West Bengal 7.07 47.32 54.39 0.17 1.12 0.00 1.29 0.54 Total 1,875.30 4,226.58 3,917.96 10,019.84 44.02 100.00 92.10 236.12 100.00 NHB = National Housing Bank, HUDCO = Housing and Urban Development Corporation Limited, HDFC = Housing Development Finance Corporation Limited. Notes: (i) Tamil Nadu, Kerala, Maharashtra, Gujarat, and Andhra Pradesh account for 85.19% of total disbursements. (ii) For HDFC, the figures are for state cooperatives, state government corporations, private sector, and major individual loans, accounting for 92.1% of the total funds disbursed. (iii) For NHB, data cover assistance to the Government. In case of HFC assistance, state data are not available. (iv) $236.118 million is 78.7% of the total disbursement of $300 million Source: Borrower's progress reports. Table A1.3: Disbursement of Loans by NHB, HUDCO and HDFC by State (Rs million) ($ million) LOAN UTILIZATION Major Recipients of ADB-HF1 Loan 30.53 24.82 10.96 9.70 9.19 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 Tamilnadu Kerala Maharashtra Gujarat Andhra Pradesh State % Appendix 1 17 18 Appendix 1 Loan No. 1549-IND to NHB (Cooperative schemes only) Loan No. 1550-IND to HUDCO Loan No. 1551-IND to HDFC

(for state cooperatives, state governments, corporations, state governments, and private sector, accounting for 62.4% of the total funds disbursed) Source: Borrowers' progress reports. Table A1.4: Disbursement of Loans by State LOAN UTILIZATION Major Recipient States of Loan 1549 3.14 55.33 41.16 0.00 10.00 20.00 30.00 40.00 50.00 60.00 Karnataka Kerala Tamil Nadu State % Major Recipients of Loan 1550 20.94 14.82 15.20 33.16 0.00 5.00 10.00 15.00 20.00 25.00 30.00 35.00 Andhra Pradesh Gujarat Kerala Tamil Nadu State % Major Recipients of Loan 1551 12.75 9.27 12.54 46.10 0.00 10.00 20.00 30.00 40.00 50.00 Karnataka Madhya Pradesh Rajasthan Tamil Nadu

State %Serial Name of the Subborrower Rs million $ million Equivalent Component 1 AB Homes 3.300 0.083 Housing finance institutions 2 BOB Housing 5.413 0.135 Housing finance institutions 3 AB Homes 1.960 0.049 Housing finance institutions 4 AB Homes 2.839 0.071 Housing finance institutions 5 Housing Development Finance Corporation 6.965 0.174 Housing finance institutions 6 Housing Development Finance Corporation 100.155 2.504 Housing finance institutions 7 AB Homes 1.860 0.047 Housing finance institutions 8 Cent Bank Homes 1.860 0.047 Housing finance institutions 9 Karnataka Agricultural & Rural Development Board 57.400 1.435 Cooperative schemes 10 AB Homes 2.470 0.062 Housing finance institutions 11 Global 0.880 0.022 Housing finance institutions 12 Karnataka Agricultural & Rural Development Board 1.490 0.037 Cooperative schemes 13 Vysya Bank HFI 16.600 0.415 Housing finance institutions 14 West Bengal Agricultural & Rural Development Board 7.070 0.177 Cooperative schemes 15 AB Homes 2.260 0.057 Housing finance institutions 16 BOB Housing 50.040 1.251 Housing finance institutions 17 Housing Development Finance Corporation 17.366 0.434 Housing finance institutions 18 AB Homes 75.330 1.883 Housing finance institutions 19 BOB Housing 41.250 1.031 Housing finance institutions 20 LIC Housing 8.173 0.204 Housing finance institutions 21 Can Fin Homes 17.000 0.425 Housing finance institutions 22 BOB Housing 12.730 0.318 Housing finance institutions 23 Hometrust 115.540 2.889 Housing finance institutions 24 Vijaya Bank Housing 23.170 0.579 Housing finance institutions 25 Hometrust 14.102 0.353 Housing finance institutions 26 Housing Development Finance Corporation 49.937 1.248 Housing finance institutions 27 Kerala Agricultural and Rural Development Bank 192.824 4.723 Cooperative schemes 28 Gujarat Lease Financing Ltd. 77.39 1.833 Housing finance institutions 29 Tamil Nadu Apex Cooperative 124.370 2.946 Cooperative schemes 30 LIC Housing 28.293 0.670 Housing finance institutions 31 Dewan Homes 15.680 0.371 Housing finance institutions 32 BOB Housing 5.555 0.132 Housing finance institutions 33 Vijaya Bank Housing 0.428 0.010 Housing finance institutions 34 Kerala Agricultural and Rural Development Bank 278.576 6.600 Cooperative schemes

35 Dewan Homes 2.940 0.070 Housing finance institutions 36 BOB Housing 7.045 0.167 Housing finance institutions 37 Global 3.068 0.073 Housing finance institutions 38 Cent Bank Homes 10.592 0.251 Housing finance institutions 39 Vijaya Bank Housing 0.180 0.004 Housing finance institutions 40 PNB Housing 38.240 0.906 Housing finance institutions 41 AB Homes 17.668 0.419 Housing finance institutions 42 Gujarat Lease Financing Ltd. 22.291 0.528 Housing finance institutions 43 BOB Housing 4.465 0.106 Housing finance institutions Table A2.1: Loan No. 1549-IND: Housing Finance Project – NHB (details of subloans) Appendix 2 19Serial Name of the Subborrower Rs million $ million Equivalent Component 44 Vijaya Bank Housing 0.160 0.004 Housing finance institutions 45 Dewan Homes 56.993 1.350 Housing finance institutions 46 Gruh 33.948 0.804 Housing finance institutions 47 Hometrust 10.230 0.242 Housing finance institutions 48 Housing and Urban Development Corporation 153.600 3.639 Housing finance institutions 49 AB Homes 12.400 0.294 Housing finance institutions 50 Can Fin Homes 17.599 0.417 Housing finance institutions 51 BOB Housing 7.006 0.166 Housing finance institutions 52 Tamil Nadu Apex Cooperative 79.667 1.887 Cooperative schemes 53 Kerala Agricultural and Rural Development Bank 270.489 6.347 Cooperative schemes 54 AB Homes 8.647 0.199 Housing finance institutions 55 BOB Housing 14.684 0.338 Housing finance institutions 56 BOB Housing 11.841 0.272 Housing finance institutions 57 BOB Housing 8.981 0.206 Housing finance institutions 58 Can Fin Homes 4.396 0.101 Housing finance institutions 59 Can Fin Homes 118.350 2.721 Housing finance institutions 60 Dewan Homes 115.080 2.646 Housing finance institutions 61 Gujarat Lease Financing Ltd. 6.625 0.152 Housing finance institutions 62 Gujarat Lease Financing Ltd. 6.917 0.159 Housing finance institutions 63 Gujarat Lease Financing Ltd. 10.663 0.245 Housing finance institutions 64 Gruh 27.977 0.643 Housing finance institutions 65 Hometrust 1.255 0.029 Housing finance institutions 66 Hometrust 7.501 0.172 Housing finance institutions 67 Housing and Urban Development Corporation - KSHB 210.000 4.828 Housing finance institutions 68 Kerala Agricultural and Rural Development Bank 184.980 4.252 Cooperative schemes 69 Kerala Agricultural and Rural Development Bank 30.950 0.711 Cooperative schemes 70 Kerala Agricultural and Rural Development Bank 78.780 1.811 Cooperative schemes

71 Kerala Agricultural and Rural Development Bank 0.953 0.022 Cooperative schemes 72 LIC Housing 94.508 2.173 Housing finance institutions 73 PNB Housing 54.860 1.261 Housing finance institutions 74 PNB Housing 79.390 1.825 Housing finance institutions 75 PNB Housing 84.880 1.951 Housing finance institutions 76 PNB Housing 98.930 2.274 Housing finance institutions 77 PNB Housing 107.340 2.468 Housing finance institutions 78 PNB Housing 211.430 4.860 Housing finance institutions 79 Tamil Nadu Apex Cooperative 124.367 2.859 Cooperative schemes 80 Tamil Nadu Apex Cooperative 143.862 3.307 Cooperative schemes 81 Tamil Nadu Apex Cooperative 3.552 0.082 Cooperative schemes 82 Tamil Nadu Apex Cooperative 295.966 6.804 Cooperative schemes 83 Vijaya Bank Housing 0.155 0.004 Housing finance institutions 84 Vijaya Bank Housing 1.233 0.028 Housing finance institutions 85 Vijaya Bank Housing 1.280 0.029 Housing finance institutions 86 Vijaya Bank Housing 1.270 0.029 Housing finance institutions Total 4,260.46 100.35 Average rate of exchange: Rs42.605 = $1 Source: National Housing Bank. 20 Appendix 2 Appendix 2 21 Serial Subborrower State Rs million $ Million Equivalent Component 1 State Andaman & Nicobar Andaman & Nicobar 6.30 0.15 Housing board and local bodies 2 Andhra Pradesh Housing Board Andhra Pradesh 3.68 0.09 Housing board and local bodies 3 Andhra Pradesh Housing Board Andhra Pradesh 5.68 0.13 Housing board and local bodies 4 Andhra Pradesh Housing Board Andhra Pradesh 8.81 0.21 Housing board and local bodies 5 SHARE, Hyderabad Andhra Pradesh 0.80 0.02 Nongovernment organizations 6 Andhra Pradesh Housing Board Andhra Pradesh 10.69 0.25 Housing board and local bodies 7 TWACHARDO Andhra Pradesh 0.20 0.00 Nongovernment organizations 8 APSHC - East Godavari Andhra Pradesh 30.00 0.71 Housing board and local bodies 9 APSHC - Vizianagram Andhra Pradesh 30.00 0.71 Housing board and local bodies 10 APSHC - Godavari (GII) Andhra Pradesh 30.00 0.71 Housing board and local bodies 11 APSHC - Godavari (GI) Andhra Pradesh 30.00 0.71 Housing board and local bodies

12 APSHC - East & West Godavari Andhra Pradesh 25.01 0.59 Housing board and local bodies 13 APSHC - Karnool, Annanthpur Andhra Pradesh 20.43 0.48 Housing board and local bodies 14 APSHC - Guntur Andhra Pradesh 30.00 0.71 Housing board and local bodies 15 APSHC - Prakasam Andhra Pradesh 27.00 0.64 Housing board and local bodies 16 APSHC - Chitoor Andhra Pradesh 30.00 0.71 Housing board and local bodies 17 APSHC - Nizamabad Andhra Pradesh 30.00 0.71 Housing board and local bodies 18 APSHC - Chitoor Andhra Pradesh 30.00 0.71 Housing board and local bodies 19 APSHC - Cuddupah Andhra Pradesh 26.25 0.62 Housing board and local bodies 20 APSHC - Nellore Andhra Pradesh 15.00 0.35 Housing board and local bodies 21 APSHC - Kurnool Andhra Pradesh 15.00 0.35 Housing board and local bodies 22 TWACHARDO Andhra Pradesh 0.20 0.00 Nongovernment organizations 23 APSHC - Pundar Andhra Pradesh 102.89 2.43 Housing board and local bodies 24 APSHC - AP Andhra Pradesh 125.00 2.96 Housing board and local bodies 25 Assam State Coop Housing Fed Assam 70.08 1.66 Cooperative schemes 26 BSCHFL Bihar 50.00 1.18 Cooperative schemes 27 SHAKTI Mahila Vikas Swalambi Samiti Bihar 0.56 0.01 Nongovernment organizations 28 Sardar Sarovar Nigam Ltd. Gujarat 186.86 4.42 Housing board and local bodies 29 Gujarat HB Gujarat 1.76 0.04 Housing board and local bodies 30 Gujarat HB Gujarat 1.71 0.04 Housing board and local bodies 31 Sardar Sarovar Nigam Ltd. Gujarat 390.61 9.24 Housing board and local bodies 32 Gujarat HB Gujarat 22.37 0.53 Housing board and local bodies 33 SEWA Bank, Ahmedabad Gujarat 9.60 0.23 Nongovernment organizations 34 Surat Municipal Corporation Gujarat 8.90 0.21 Slum improvement 35 Surat Municipal Corporation Gujarat 8.93 0.21 Slum improvement 36 Gujarat HB Gujarat 0.90 0.02 Housing board and local bodies 37 Gujarat HB Gujarat 1.01 0.02 Housing board and local bodies 38 Gujarat HB Gujarat 9.90 0.23 Housing board and local bodies 39 Haryana HB Haryana 22.05 0.52 Housing board and local bodies 40 Haryana HB Haryana 16.81 0.40 Housing board and local bodies 41 Haryana HB Haryana 21.25 0.50 Housing board and local bodies 42 Haryana HB Haryana 17.88 0.42 Housing board and local bodies 43 Haryana HB Haryana 5.45 0.13 Housing board and local bodies 44 Haryana HB Haryana 5.54 0.13 Housing board and local bodies 45 Haryana HB Haryana 3.37 0.08 Housing board and local bodies 46 Haryana HB Haryana 3.41 0.08 Housing board and local bodies 47 HPHB Himachal Pradesh 4.78 0.11 Housing board and local bodies 48 HPHB Himachal Pradesh 2.45 0.06 Housing board and local bodies 49 Jammu Kashmir Coop Housing Fed Jammu & Kashmir 6.26 0.15 Cooperative schemes

50 Jammu Kashmir Coop Housing Fed Jammu & Kashmir 7.06 0.17 Cooperative schemes 51 Karnataka Slum Clearance Board Karnataka 1.79 0.04 Slum improvement Table A2.2: Loan No. 1550-IND: Housing Finance Project – HUDCO (details of subloans)22 Appendix 2 Serial Subborrower State Rs million $ Million Equivalent Component 52 Karnataka Slum Clearance Board Karnataka 2.69 0.06 Slum improvement 53 Karnataka Slum Clearance Board Karnataka 3.11 0.07 Slum improvement 54 Karnataka Slum Clearance Board Karnataka 1.81 0.04 Slum improvement 55 Karnataka Slum Clearance Board Karnataka 2.95 0.07 Slum improvement 56 KHB Karnataka 40.37 0.96 Slum improvement 57 KSHB Kerala 21.42 0.51 Housing board and local bodies 58 KSHB Kerala 6.72 0.16 Housing board and local bodies 59 KSHB Kerala 24.60 0.58 Housing board and local bodies 60 KSHB Kerala 24.60 0.58 Housing board and local bodies 61 KSHB Kerala 24.60 0.58 Housing board and local bodies 62 KSHB Kerala 30.00 0.71 Housing board and local bodies 63 KSHB Kerala 30.00 0.71 Housing board and local bodies 64 KSHB Kerala 29.75 0.70 Housing board and local bodies 65 KSHB Kerala 29.75 0.70 Housing board and local bodies 66 KSHB Kerala 29.75 0.70 Housing board and local bodies 67 Housefed Kerala 70.74 1.67 Cooperative schemes 68 Santhigiri Ashram Kerala 0.73 0.02 Nongovernment organizations 69 SIDA, Kottapally Kerala 7.00 0.17 Nongovernment organizations 70 KSHB Kerala 15.93 0.38 Housing board and local bodies 71 KSHB Kerala 16.57 0.39 Nongovernment organizations 72 KSHB Kerala 15.00 0.35 Nongovernment organizations 73 Housefed Kerala 29.58 0.70 Cooperative schemes 74 Housefed Kerala 78.60 1.86 Housing board and local bodies 75 Housefed Kerala 80.01 1.89 Housing board and local bodies 76 Housefed Kerala 80.01 1.89 Cooperative schemes 77 KSHB Kerala 25.38 0.60 Housing board and local bodies 78 KSHB Kerala 6.95 0.16 Housing board and local bodies 79 KSHB Kerala 11.60 0.27 Housing board and local bodies 80 KSHB Kerala 11.60 0.27 Housing board and local bodies 81 KSHB Kerala 11.60 0.27 Housing board and local bodies 82 Housefed Kerala 26.08 0.62 Cooperative schemes 83 Housefed Kerala 30.00 0.71 Cooperative schemes 84 Housefed Kerala 170.00 4.02 Cooperative schemes 85 Vandanmedu Development Society Kerala 7.00 0.17 Nongovernment organizations 86 Vandanmedu Development Society Kerala 1.20 0.03 Nongovernment organizations 87 Vandanmedu Development Society Kerala 2.50 0.06 Nongovernment organizations

88 SIDA Kerala 12.50 0.30 Nongovernment organizations 89 KSHB Kerala 19.76 0.47 Housing board and local bodies 90 Housefed Kerala 72.15 1.71 Cooperative schemes 91 Housefed Kerala 86.74 2.05 Cooperative schemes 92 Housefed Kerala 86.95 2.06 Cooperative schemes 93 KSHB Kerala 25.26 0.60 Housing board and local bodies 94 KSHB Kerala 25.26 0.60 Housing board and local bodies 95 KSHB Kerala 25.26 0.60 Housing board and local bodies 96 KSHB Kerala 25.26 0.60 Housing board and local bodies 97 KSHB Kerala 25.26 0.60 Housing board and local bodies 98 KSHB Kerala 25.26 0.60 Housing board and local bodies 99 COSTFORD Kerala 12.50 0.30 Nongovernment organizations 100 KSHB Kerala 25.26 0.60 Housing board and local bodies 101 KSHB Kerala 25.26 0.60 Housing board and local bodies 102 Special Area Development Authority Madhya Pradesh 2.43 0.06 Housing board and local bodies 103 Jabalpur Development Authority Madhya Pradesh 14.70 0.35 Housing board and local bodies 104 Special Area Development Authority Madhya Pradesh 8.89 0.21 Housing board and local bodies 105 MRSPBM Madhya Pradesh 30.00 0.71 Cooperative schemes 106 MPHB Madhya Pradesh 15.40 0.36 Housing board and local bodies 107 MPHB Madhya Pradesh 3.33 0.08 Housing board and local bodiesAppendix 2 23 Serial Subborrower State Rs million $ Million Equivalent Component 108 SPARC-Suryodaya Coop Society Maharashtra 1.40 0.03 Nongovernment organizations 109 NIT, Nagpur Maharashtra 43.85 1.04 Housing board and local bodies 110 JMC, Jalgaon Maharashtra 36.92 0.87 Slum improvement 111 JMC, Jalgaon Maharashtra 52.69 1.25 Slum improvement 112 JMC, Jalgaon Maharashtra 35.77 0.85 Slum improvement 113 CHIL CHIL Asian Mission Society Manipur 0.74 0.02 Nongovernment organizations 114 Artisans Alliance Jawaja, Rajasthan Rajasthan 1.15 0.03 Nongovernment organizations 115 Rajasthan HB Rajasthan 9.18 0.22 Housing board and local bodies 116 Rajasthan HB Rajasthan 19.20 0.45 Housing board and local bodies 117 Urban Improvement Trust, Ajmer Rajasthan 3.50 0.08 Housing board and local bodies 118 Rajasthan HB Rajasthan 11.49 0.27 Housing board and local bodies 119 Rajasthan HB Rajasthan 25.69 0.61 Housing board and local bodies 120 Rajasthan HB Rajasthan 6.31 0.15 Housing board and local bodies 121 Rajasthan HB Rajasthan 4.88 0.12 Housing board and local bodies 122 TNCHF - Madurai, Mannar, Thirumalai Tamil Nadu 13.50 0.32 Cooperative schemes

123 TNCHF - Madurai, Mannar, Thirumalai Tamil Nadu 15.68 0.37 Cooperative schemes 124 TNCHF - Madurai, Mannar, Thirumalai Tamil Nadu 15.68 0.37 Cooperative schemes 125 TNCHF - Mannar, Thirumalai, Rammd Tamil Nadu 30.34 0.72 Cooperative schemes 126 Tamil Nadu Handloom Weavers Coop Society Tamil Nadu 0.84 0.02 Workshed cum housing 127 Tamil Nadu Slum Clearance Board Tamil Nadu 14.70 0.35 Slum improvement 128 TNCHF - Arcot, Ramaswamy Tamil Nadu 1.55 0.04 Cooperative schemes 129 TNCHF - Theeran Tamil Nadu 1.79 0.04 Cooperative schemes 130 TNCHF - Mannar Tamil Nadu 3.00 0.07 Cooperative schemes 131 TNCHF - Coimbatore Tamil Nadu 3.00 0.07 Cooperative schemes 132 Tamil Nadu HB Tamil Nadu 12.70 0.30 Housing board and local bodies 133 TNCHF - Mannar Tamil Nadu 12.84 0.30 Cooperative schemes 134 TNCHF - Kamarajar Tamil Nadu 12.84 0.30 Cooperative schemes 135 TNCHF - Chidambarnar Tamil Nadu 12.16 0.29 Cooperative schemes 136 TNCHF - Coimbatore Tamil Nadu 8.66 0.20 Cooperative schemes 137 TNCHF - Ambedkar Tamil Nadu 12.84 0.30 Cooperative schemes 138 TNCHF - Dharampuri Tamil Nadu 12.84 0.30 Cooperative schemes 139 TNCHF - Rajaji Tamil Nadu 12.84 0.30 Cooperative schemes 140 Tamil Nadu Slum Clearance Board Tamil Nadu 17.71 0.42 Slum improvement 141 Tamil Nadu Slum Clearance Board Tamil Nadu 9.32 0.22 Slum improvement 142 Tamil Nadu Slum Clearance Board Tamil Nadu 10.01 0.24 Slum improvement 143 TNCHF - Thanjavar Tamil Nadu 12.82 0.30 Cooperative schemes 144 TNCHF - Theeran Tamil Nadu 12.82 0.30 Cooperative schemes 145 TNCHF - Pudukottai Tamil Nadu 12.82 0.30 Cooperative schemes 146 TNCHF - Madurai Tamil Nadu 12.89 0.30 Cooperative schemes 147 TNCHF - Mannar, Thirumalai Tamil Nadu 12.82 0.30 Cooperative schemes 148 TNCHF - Kamrajar Ph IV Tamil Nadu 8.06 0.19 Cooperative schemes 149 TNCHF - N. Arcot Ambedkar Tamil Nadu 10.62 0.25 Cooperative schemes 150 TNCHF - Periyar Tamil Nadu 11.94 0.28 Cooperative schemes 151 TNCHF - Thiruchi Tamil Nadu 2.29 0.05 Cooperative schemes 152 TNCHF - Tirunelveli Tamil Nadu 8.60 0.20 Cooperative schemes 153 Palmyrah Workers Dev. Society Tamil Nadu 3.00 0.07 Nongovernment organizations 154 Tamil Nadu Slum Clearance Board Tamil Nadu 16.80 0.40 Slum improvement 155 Tamil Nadu Slum Clearance Board Tamil Nadu 8.40 0.20 Slum improvement 156 Tamil Nadu Slum Clearance Board Tamil Nadu 36.31 0.86 Slum improvement 157 TNCHF - Kamarajar Tamil Nadu 10.40 0.25 Cooperative schemes 158 TNCHF - Kanyakumari Tamil Nadu 3.08 0.07 Cooperative schemes

159 Tamil Nadu Slum Clearance Board Tamil Nadu 14.00 0.33 Slum improvement 160 Tamil Nadu Slum Clearance Board Tamil Nadu 3.13 0.07 Slum improvement 162 CEDMA, Chennai Tamil Nadu 2.50 0.06 Nongovernment organizations 163 TNCHF - Ramanathapuram Tamil Nadu 11.55 0.27 Cooperative schemes 164 TNCHF - Madurai Tamil Nadu 14.63 0.35 Cooperative schemes24 Appendix 2 Serial Subborrower State Rs million $ Million Equivalent Component 165 TNCHF - Dingigual Anna Tamil Nadu 0.97 0.02 Cooperative schemes 166 TNCHF - Perambur Tamil Nadu 10.00 0.24 Cooperative schemes 167 TNCHF - Vellore Tamil Nadu 20.00 0.47 Cooperative schemes 168 TNCHF - Tirunelveli Tamil Nadu 26.00 0.62 Cooperative schemes 169 TNCHF - Dharmapuri Tamil Nadu 24.00 0.57 Cooperative schemes 170 TNCHF - Trichy Tamil Nadu 12.00 0.28 Cooperative schemes 171 TNCHF - Madurai Tamil Nadu 16.00 0.38 Cooperative schemes 172 TNCHF - Theni Tamil Nadu 14.00 0.33 Cooperative schemes 173 TNCHF - Erode Tamil Nadu 20.00 0.47 Cooperative schemes 174 TNCHF - Madurai & Theni Tamil Nadu 45.65 1.08 Cooperative schemes 175 TNCHF - Karur, Thiran, Chinnamalai Tamil Nadu 16.66 0.39 Cooperative schemes 176 TNCHF - ESW Tamil Nadu 19.02 0.45 Cooperative schemes 177 TNCHF - MIG Tamil Nadu 22.83 0.54 Cooperative schemes 178 Tamil Nadu Slum Clearance Board Tamil Nadu 1.54 0.04 Slum improvement 179 TNCHF - Marginal Farmers Tamil Nadu 10.20 0.24 Cooperative schemes 180 Tamil Nadu HB Tamil Nadu 4.82 0.11 Housing board and local bodies 181 Community Action for Rural Development Tamil Nadu 0.41 0.01 Nongovernment organizations 182 TNCHF - Cuddalore, Viluparam Tamil Nadu 10.85 0.26 Cooperative schemes 183 TNCHF - Chennai, Kanchipuram Tamil Nadu 8.82 0.21 Cooperative schemes 184 TNCHF - Thanjuvar, Thiruarur Tamil Nadu 8.82 0.21 Cooperative schemes 185 Tamil Nadu HB Tamil Nadu 29.73 0.70 Housing board and local bodies 186 TNCHF - Salem Tamil Nadu 21.13 0.50 Cooperative schemes 187 TNCHF - Namakal Tamil Nadu 11.86 0.28 Cooperative schemes 188 TNCHF - Peryar Tamil Nadu 6.19 0.15 Cooperative schemes 189 TNCHF - Salem & Namakal Tamil Nadu 6.78 0.16 Cooperative schemes 190 TNCHF - Thirulvellikal Tamil Nadu 6.78 0.16 Cooperative schemes 191 TNCHF - Sivagangalikal Tamil Nadu 5.41 0.13 Cooperative schemes 192 MASS West Bengal 0.95 0.02 Nongovernment organizations 193 SA Samaj West Bengal 1.22 0.03 Nongovernment organizations 194 WBHB West Bengal 23.80 0.56 Housing board and local bodies 195 WB State Coop Agriculture Development West Bengal 16.40 0.39 Cooperative schemes 196 Tarun Sangha West Bengal 4.95 0.12 Nongovernment organizations Total 4,226.58 100.00 Source: Housing and Urban Development Corporation Limited.

Average rate of exchange:Rs. 42.2658 =$1Serial Name of the Subborrower State Rs million $Million Component Equivalent 5.88 Cooperative schemes 1 Tamil Nadu Cooperative Housing Federation Limited Tamil Nadu 250.00 1.10 Cooperative schemes 2 Kerala State Cooperative ARDB Kerala 47.50 5.78 Cooperative schemes 3 Tamil Nadu Cooperative Housing Federation Limited Tamil Nadu 250.00 0.31 State government corporation 4 Karnataka Power Corporation Limited Karnataka 13.20 5.69 State government corporation 5 MP Housing Board-LOC Madhya Pradesh 246.20 13.86 State government corporation 6 Tamil Nadu Police Housing Corporation Limited Tamil Nadu 589.56 0.51 State government corporation 7 Maharashtra State Police Housing Corporation Ltd Maharashtra 21.90 2.57 State government corporation Tamil Nadu Housing Board-LOC Tamil Nadu 109.50 8 1.49 State government corporation 9 Maharashtra State Police Housing & Welfare Corporation Maharashtra 58.28 6.93 State government corporation 10 Karnataka State Police Housing Corporation Karnataka 325.50 2.10 State government 11 Government of Rajasthan Rajasthan 82.13 2.56 State government 100.00 12 Government of Rajasthan Rajasthan 3.85 State government 13 Government of Rajasthan Rajasthan 150.74 0.06 Private sector Kovai Maruthi Papers Tamil Nadu 2.50 14 0.37 Private sector 16.20 Tamil Nadu 15 Premier Polytronics 0.15 Private sector 6.30 Tamil Nadu 16 Prime Cotton Textiles 4.70 Private sector 17 Larsen & Toubro-Tadapatri project Andhra Pradesh 200.00 4.37 Private sector 18 Larsen & Toubro-Amreli project Gujarat 186.00 37.70 Individuals 1,598.41 19 Individuals 100.00 4,253.92 Source: Housing Development Finance Corporation Limited. Appendix 2 25 Average rate of exchange: Rs42.5392 = $1 Table A2.3: Loan No. 1551-IND: Housing Finance Project – HDFC (details of subloans) Total26 Appendix 3 LENDING CHANNELS Lending Channels for National Housing Bank, Housing and Urban Development Corporation Limited and Housing Development Finance Corporation Limited A. NHB 1. Under the Project, NHB’s targets for lending are: (i) $40 million through cooperatives (part A), (ii) $5 million through CFIs/NGOs (part A),

(iii) $55 million through refinancing HFIs (part A), and (iv) NHB will provide $13 million as counterpart funds for equity participation in HFCs. 2. The existing channels for lending by NHB are as follows: (i) NHB lends to State Cooperatives, HFCs and commercial banks. State cooperatives in turn on-lend to primary housing cooperatives for their direct lending to member beneficiaries. HFCs and commercial banks on-lend to households, (ii) NHB lends to HFCs who on-lend to CFIs and NGOs. The latter in turn on-lend to households, and (iii) NHB lends to HFCs who on-lend directly to households. B. HUDCO 1. Under the Project, HUDCO’s targets for lending are: (i) $25 million through cooperatives (part A), (ii) $5 million through CFIs/NGOs (part A), (iii) $45 million through companies and municipalities (part A), and (iv) $25 million for slum-improvement projects and low-income housing projects (part B). 2. The existing channels for lending by HUDCO are as follows: (i) HUDCO lends to State Cooperative Housing finance societies and cooperative banks. They in turn on-lend to primary housing cooperatives. The latter institutions then on-lend to households, (ii) HUDCO lends to CFIs and NGOs. The latter in turn on-lend to households, (iii) HUDCO lends to corporations and municipalities who on-lend directly to households, and (iv) HUDCO lends to state or municipal bodies for funding Government projects for low-income housing and slum improvement. Appendix 3 C. HDFC 1. Under the Project, HDFC’s targets for lending are: (i) $10 million through cooperatives (part A), (ii) $10 million through CFIs/NGOs (part A), (iii) $65 million directly to households (part A), and (iv) $15 million for slum-improvement projects and low-income housing projects (part B). 2. The existing channels for lending by HDFC are as follows: (i) HDFC lends to State Cooperative HF societies. They in turn on-lend to primary housing cooperatives. The latter institutions then on-lend to households, (ii) HDFC lends to CFIs and NGOs. The latter in turn on-lend to households, (iii) HDFC lends to private companies/municipal corporations who on-lend to households, and (iv) HDFC lends directly to households. Source: Borrowers’ reports. 28 Appendix 4 CHRONOLOGY OF MAIN EVENTS IN PROJECT ADMINISTRATION Date Event

27

1996 5 Dec TA 2700-IND: Housing Finance Facility Project approved and carried out from January to April 1997 resulting in a proposal for the Housing Finance Project. 1997 22 Apr-7 May Fact Finding. 4 June Management Review Meeting. 17-31 July Loan Appraisal. 25-28 Aug Loan Negotiations. 25 Sep Board Approval. 6 Nov Loan Signing. 11 Dec Loans to HUDCO and HDFC declared effective. 12 Dec Loan to NHB declared effective. 24 Dec Advance of $20 million to HDFC. 31 Dec Advances of $20 million each to NHB and HUDCO. 1998 19-29 Jan Inception Mission. 2 Jul Liquidation of $20 million by HDFC. 7 Sep Liquidation of $20 million by NHB. 7 Oct Liquidation of $18 million by HUDCO. 10 Nov Liquidation of $2 million by HUDCO. 12 Nov Advance of $30 million and $40 million each to NHB and HDFC. 13 Nov Advance of $30 million to HUDCO. 12-22 Oct Review (1). The Mission found that the Borrowers and Government of India are in general compliant with the Loan Covenants. The Project implementation was efficient and effective. Based on the projections from the Borrowers, the Mission estimates that the loan proceeds would be fully disbursed and liquidated by end2000. 1999 1 Jan Delegation of the Project to India Resident Mission for administration. 26 Jan Liquidation of $40 million by HDFC. 19 Jul Liquidation of $8.9 million by HUDCO. 23 Jul Advance of $40 million to HDFC. 3 Sep Liquidation of $3.3 million by HUDCO. 2 Nov Liquidation of $17.8 million by HUDCO. 1 Dec 199923 Feb 2000 Review (2). The three loans for the Project fully utilized and the Mission recommended closure in September 2000 after completion of the SOE verification by India Resident Mission. The Mission noted that although significant progress was made in the implementation of the policy and institutional action plan, dialogue with the Government on further actions to strengthen and expand the housing finance system should continue with the processing of the proposed Housing Finance II Project. Appendix 4 29 6 Dec $50 million disbursed to HUDCO as reimbursement totaling $100 million utilization, and the closing date for the loan.

15 Dec Disbursement of $50 million to NHB as reimbursement. 23 Dec Liquidation of $30 million by NHB, and closing of the NHB loan. 2000 6-18 Mar & 4-5 Apr Disbursement Review (1). Loans 1550/51-IND. Visited project sites and field offices in Andhra Pradesh and Tamil Nadu and met with senior officials of HUDCO and HDFC. The Mission reported ineligible claims relating to HUDCO and HDFC and informed the respective Borrowers. Review determined that HUDCO should adopt practices for instilling financial discipline to ensure project viability and cost recovery. 29 May Liquidation of $19.9 million by HDFC. 24 July-10 Aug Disbursement Review (2). Loans 1549/50/51-IND. Mission findings: (i) ineligible expenses relating to NHB, (ii) sought information from HUDCO for further scrutiny, (iii) concluded HUDCO relies on state government guarantee and has not been monitoring its loan portfolio sufficiently in such cases, and (iv) HUDCO’s monitoring of NGO loans displayed diligence and considerable care. 10 Dec Terminal date for commitments under HUDCO and HDFC loans. 11 Dec Terminal date for commitments under NHB. 27 Dec Liquidation of $14.6 million by HDFC. 2001 10-16 Jan Disbursement Review (3). Loan 1550-IND. This Mission was a followup to an earlier Mission fielded in CY2000. The Mission determined further ineligible expenditures. 26 Jan Liquidation of $5.449 million by HDFC, achieving total loan utilization, and closing date of the HDFC loan. 26 Feb-10 Mar Disbursement Review (4). Loans 1549/50/51-IND. A Mission from India Resident Mission visited the state of Karnataka. The Mission concluded that a limited SOE review in two states (Karnataka and Kerala) identified deficiencies in the records maintained by HUDCO to substantiate loan utilization. To determine the nature and extent of ineligible expenses, the Mission recommended an external audit by qualified chartered accountants. In case of the NHB component, the Mission recommended substitution of identified ineligible expenditure with other eligible expenditure. 3, 11-12 Apr Disbursement Review (5). Loan 1549-IND. The Mission visited the headquarters of NHB to carry out a full review of all the supporting documents maintained by NHB for the liquidation of $20 million. The Mission recommended: (i) an amount of $12 million equivalent was ineligible and required to be substituted, (ii) sought information regarding disbursement to TNACHF, and (iii) HUDCO was requested to confirm if scheme No. 14,531 was claimed from both NHB and ADB.

23-25 May Disbursement Review (6). Loan 1551-IND. A Mission visited Bhopal, Madhya Pradesh office of HDFC. The Mission concluded that ADB loan proceeds, which comprise 66% of HDFC’s loan to MPHB have been utilized for the Project purposes of construction of housing units. The Mission requested HDFC to provide a final physical and financial status along with list of beneficiaries funded. 30 Appendix 4 4 Jun-8 Aug Loan 1550-IND. Staff consultants fielded by ADB in the states of Meghalaya, Andhra Pradesh, Tamil Nadu and Kerala which accounted for $69.95 million in loan utilization to review adequacy of accounts and records maintained by HUDCO and to identify both the physical and financial progress of sub-projects financed out of the loan proceeds. An Audit Review Mission from Office of the General Auditor joined the Consultants from 30 July to 3 August to observe the consultant’s review of the HUDCO’s SOE and discuss the findings and possible recommendations. The Office of General Auditor Mission observed: (i) lack of monitoring procedure of the EA should have been identified during appraisal; (ii) project reviews by India Resident Mission appear to be an effective tool in determining appropriate use of funds for project purposes. 4 Dec The Staff Consultants submitted their report. The findings established the extent of ineligible expenses to be $10.2 million and requested HUDCO to provide additional information to justify expenses amounting to $18.4 million. The Consultants also observed inadequacies in the maintenance of records and accounts, monitoring procedures, and commented upon the poor recovery performance of HUDCO borrowers. 2002 27 Jun-9 Jul Project cum Disbursement Review (7). Loan 1550-IND. The Mission reviewed a set of randomly selected schemes, out of the 30 schemes offered as substitution of ineligible schemes by HUDCO in three states. Based on the findings on the field, the Mission recommended that an expenditure totaling $10.33 million relating to 28 schemes be accepted for reimbursement. 22 Nov HDFC could not provide details of beneficiaries assisted under the line of credit of $6.936 million to the GOR. In substitution, HDFC offered a subloan to Karnataka State Police Housing Corporation Limited. With the approval of the substitution, India Resident Mission issued LMED for closure of the HDFC component of the Project effective 26 January 2001. 27 Dec NHB replaced ineligible expenses identified by earlier review missions with new subloans, which was processed and approved by India Resident Mission. With the replacement of ineligible expenditures, India Resident Mission issued LMED for closure of the loan effective 23 December 1999. 27 Dec India Resident Mission recommended approval of subloans amounting to $26.8 million to substitute the ineligible expenses and issued LMED for closure of the

HUDCO loan effective 6 December 1999. 2003 30 Jun Original loan closing date for the three loans. GOR = Government of Rajasthan, HUDCO = Housing and Urban Development Corporation Limited, HDFC = Housing Development Finance Corporation Limited, LMED = Loan Milestone Events Date, MPHB = Madhya Pradesh Housing Board, NOG = nongovernment organization, SOE = statement of expenditure, TA = technical assistance, TNACHF = Tamil Nadu Apex Cooperative Housing Federation. DFI Calendar Year Projected Cumulative Actual Cumulative NHB 1997 20.00 20.00 1998 25.00 25.00 30.00 50.00 1999 35.00 60.00 50.00 100.00 HDFC 1997 20.00 20.00 1998 20.00 20.00 30.00 50.00 1999 50.00 70.00 50.00 100.00 HUDCO 1997 20.00 20.00 1998 15.00 15.00 40.00 60.00 1999 25.00 40.00 40.00 100.00 Source: Loan Financial Information System. Table A5: Projected and Actual Disbursement of Loan Proceeds ($ million) Appendix 5 3132 Appendix 6 Executive Director Executive Director General Manager General Manager (law) General Manager General Manager Deputy General Manager Deputy General Manager Deputy General Manager Assistant General Manager Assistant General Manager Assistant General Manager Regional Manager Regional Manager Regional Manager Manager Manager Manager Deputy Manager Deputy Manager Deputy Manager Assistant Manager Assistant Manager Assistant Manager Source : National Housing Bank Table A6.1: Organization Structure of National Housing Bank Chairman and Managing Director ORGANIZATION STRUCTUES Board of Directors Director Senior Executive Executive Director Executive Executive Director Executive Director Chief Executive Executive Executive

Director and (organizational Director (administration and (management services Vigilance Director Director (works Director Executive Director system) (training) building technology and human resource Officer (north east and disposal) (law) (projects) transfer development zone Source: Housing and Urban Development Corporation Limited. Company Secretary Director Chairman & Managing Director Table A6.2: Organization Structure of Housing and Urban Development Corporation Limited Appendix 6 33 General Manager, Executive Director, Executive Director, Mumbai South North Treasury General Manager, Maharashtra General Manager, General Manager, Karnataka Gujarat Mumbai Office General Manager, Kolkata General Manager, General Manager, Andhra Pradesh New Delhi Accounts General Manager, Area Manager, Punjab/ Tamil Nadu Haryana/HP/Chandhigarh Administration Deputy General, Area Manager, Gujarat Manager, Kerala Library Branch Manager, Deputy General Manager, Coimbatore Uttar Pradesh Recoveries Dubai Branch Manager, Indore Secretarial & Dadar Branch Manager, Jaipur Deposits Department Corporate Legal Communications Human Resouce Development & Centre for Housing Finance Information Technology User Support Group Source:Housing Development Finance Corporation Limited. Board of Directors Chairman Managing Director

Table A6.3: Organization Structure of Housing Development Finance Corporation Limited Technical Services Personnel 34 Appendix 6 Appendix 7 35 NHB 1999 2000 2001 2002 Disbursements: of which 7,742.7 8,921.8 10,776.4 11,360.5 Refinance 7,583.0 8,416.8 10,082.2 10,248.0 Direct Finance 159.7 505.0 694.2 1,112.5 Cumulative Refinance of which: 43,739.9 52,156.8 62,214.8 72,513.6 Scheduled Commercial Banks 2,375.7 2,399.7 3,438.4 4,346.6 Housing Finance Companies 33,980.6 40,495.3 48,109.0 55,308.1 Others 7,383.6 9,261.8 10,667.4 12,858.9 HUDCO 1999 2000 2001 2002 Cumulative Upto 2002 Housing Sanctions 40,170 47,810 38,710 25,750 228,630 Releases 19,280 26,670 28,500 18,250 187,340 Urban Infrastructure Sanctions 26,590 41,470 40,420 55,650 191,490 Releases 12,730 17,460 19,870 28,360 106,000 Total Sanctions 66,760 89,080 79,130 81,410 420,120 Releases 32,010 43,740 48,290 46,610 293,340 % of releases 48 49 61 57 HDFC 1999 2000 2001 2002 Cumulative Upto 2002 Approvals 40,718 53,052 68,798 90,413 401,360 Disbursements 34,243 44,927 58,030 76,166 335,700 % of disbursements 84 85 84 84 Composition of Loans Outstanding (%) Individuals 69 72 73 73 Corporates 30 27 26 26 Others 1 1 1 1 Source: Borrowers' reports. (Rs million) (approvals and disbursements) Lending Operations of the Borrowers 36 Appendix 8 1999 2000 2001 2002 Liabilities Capital Authorized 3,500 3,500 3,500 3,500 Issued and Paidup (wholly subscribed by RBI) 3,500 3,500 3,500 3,500 Subtotal 3,500 3,500 3,500 3,500 Reserves

Reserve Fund 4,260 5,100 6,130 7,140 Special Fund Rural Housing Fund 700 700 700 700 Less: Amount borrowed from RBI out of 500 500 500 500 National Housing Credit (LTO) Fund Less: Transferred to General Reserve 200 Other Reserves Research & Development Fund 50 50 50 50 Equity Participation Fund 150 150 150 150 Savings Incentive for EWS Fund 50 50 50 50 Less: Transferred to General Reserve 250 Special Reserve in terms of Section 36 (1) 513 Investment Fluctuation Reserve 98 107 128 8 Subtotal 4,808 5,657 6,708 7,662 Balance of Net Profit 5 2 7 7 Bonds and Debentures 15,762 19,257 24,252 24,879 Deposits in HLAs 1,934 1,880 1,796 1,599 Borrowings From Reserve Bank of India - National Housing Credit (LTO) Fund 8,750 8,750 8,750 1,750 - Others 750 From Government of India From Other Sources - In India 10,653 10,020 9,287 8,553 - Outside India 3,076 5,376 5,599 6,728 Subtotal 22,480 24,146 23,636 17,781 Gifts, Grants, Donations and Benefactions Current Liabilities and Provisions 2,184 2,428 4,441 4,178 Other Liabilities 278 2,730 3,642 3,490 Total (Liabilities) 50,950 59,601 67,982 63,095 Assets Cash and Bank Balances Cash in hand and Balance with RBI 4 12 20 5 Balance with other banks in India and outside 282 1,528 4237 4051 Subtotal 285 1,540 4,257 4,056 Money at call and at short notice 311 Investments Securities of Central and State Governments 1,304 1,333 753 Stocks, shares, bonds, debentures and 89 146 143 151 securities of Housing Finance Institutions Stocks, shares, bonds, debentures, and 3,806 4,842 2,343 968 securities of other Institutions Subtotal 5,199 6,321 3,238 1,119 Loans and Advances Housing Finance Institutions 27,245 32,280 37,420 41,988 Scheduled Banks 869 531 1,456 2,068 State Cooperative Agricultural Rural 3,435 3,971 4,641 5,354

Development Banks/Land Development Banks Others 220 608 998 1,859 Subtotal 31,769 37,389 44,515 51,269 Bills Purchased, discounted/rediscounted Fixed Assets (at cost less depreciation) Land 113 112 99 97 Premises 189 180 169 162 Others 14 11 10 13 Subtotal 316 302 277 273 Other Assets 11,447 12,169 13,588 4,780 HLA deposits with Banks/HFCs (as per contra) 1,934 1,880 1,796 1,599 Total (Assets) 50,950 59,601 67,982 63,095 Source: National Housing Bank. FINANCIAL STATEMENTS OF NATIONAL HOUSING BANK Item Table A8.1: Balance Sheet Fiscal Year Ending 30 June (Rs million)Item 1999 2000 2001 2002 Expenses 5,935.30 5,155.30 4,680.40 Interest paid on deposits, borrowings, etc. 4,005.60 Establishment Expenses a 140.00 98.60 81.30 111.80 0.50 0.20 0.10 Directors', executive committee members' 0.10 fees & expenses 0.20 0.10 0.10 Auditors' fees 0.10 12.20 11.40 10.80 Rent, taxes, insurance, lighting, etc. 16.20 14.00 22.80 7.40 Law charges 9.10 2.90 2.80 2.10 Postage, telegram, telex, and telephone 2.90 6.50 12.20 6.80 Stationery, printing, advertisement, etc. 8.70 12.60 16.20 16.00 Depreciation, amortization 17.10 27.20 29.40 26.50 Other expenditure 27.20 1,582.10 1,113.60 836.90 Balance of profit carried down 585.20 7,733.50 6,462.60 5,668.40 Subtotal 4,784.00 513.10 - Less: Withdrawn from Reserve Fund 636.60 78.50 - Less: Provision for Income Tax 560.10 1,035.10 836.90 Balance Profit transferred to Appropriation Account 585.20 1,709.80 1,113.60 836.90 Total 585.20 Income 7,354.30 5,825.90 4,853.60 Interest and Discount 4,067.30

498.90 786.20 Income from investments 662.10 - Commission, brokerage, etc. 254.60 137.80 28.60 Other income 54.60 7,733.50 6,462.60 5,668.40 Subtotal 4,784.00 1,582.10 1,113.60 836.90 Balance of Profit brought down 585.20 127.70 1,709.80 1,113.60 836.90 Total 585.20 a avelling expenses. includes Staff salaries, allowances, etc., and terminal benefits, underwriting commission, brokerage and guarantee fee, and tr 37 Source: National Housing Bank. Table A8.2: Income Statements of National Housing Bank Fiscal Year ending 30 June Appendix 838 Appendix 8 Item 1999 2000 2001 2002 Return on Equity (%) 7.29 9.58 10.69 8.85 Return on Assets (%) 1.15 1.42 1.59 1.37 Debt-Equity Ratio 4.9 5.3 5.3 4.5 Captial Adequacy Ratio 16.86 16.61 16.83 20.16 Debt-Service Coverage Ratio 1.16 Source: National Housing Bank. Less than More than More than More than More than Total or equal to 1 year up 3 years up 5 years up 7 years 1 year to 3 years to 5 years to 7 years Rupee assets 15,215.80 21,868.60 19,012.90 13,627.40 20,137.60 89,862.30 Foreign currency assets 283.20 589.90 634.60 670.20 5,767.30 7,945.20 Total Assets 15,499.00 22,458.50 19,647.50 14,297.60 25,904.90 97,807.50 Rupee liabilities 9,079.50 18,272.80 25,772.10 8,487.90 32,275.80 93,888.10 Foreign currency liabilities 408.60 823.50 850.10 867.10 6,456.90 9,406.20 Total Liabilities 9,488.10 19,096.30 26,622.20 9,355.00 38,732.70 103,294.30 Source: National Housing Bank. Less than More than More than More than More than Total or equal to 1 year up 3 years up 5 years up 7 years 1 year to 3 years to 5 years to 7 years Rupee assets 13,682.20 21,742.00 15,712.70 13,467.30 20,042.70 84,646.90 Foreign currency assets 217.80 680.90 688.80 697.50 5,289.50 7,574.50 - Transfer from Investment Fluctuation Reserve

124.60

Total Assets 13,900.00 22,422.90 16,401.50 14,164.80 25,332.20 92,221.40 Rupee liabilities 8,005.00 20,495.90 11,447.60 12,012.90 40,306.40 92,267.80 Foreign currency liabilities 345.30 921.10 909.90 900.10 6,047.80 9,124.20 Total Liabilities 8,350.30 21,417.00 12,357.50 12,913.00 46,354.20 101,392.00 Source: National Housing Bank. Table A8.3: Ratio Analysis of National Housing Bank Asset-Liquidity Management (Rs million) (Rs million) Table A8.5: Liquidity-Maturity Pattern of Assets and Liabilities, FY2001 Table A8.4: Liquidity-Maturity Pattern of Assets and Liabilities, FY2002 39 Item 1999 2000 2001 2002 Liabilities Capital Equity Shares 12,500 12,500 12,500 25,000 Preference Shares Total 12,500 12,500 12,500 25,000 Issued and Paidup 3,960 8,980 11,780 14,080 Share Application Money 1,810 Subtotal 5,770 8,980 11,780 14,080 Reserves General Reserves 1,126 1,780 1,780 2,241 Share Premium Account Capital Reserve Reserve for bad and doubtful debts 92 139 194 252 Special Reserve 2,707 3,338 4,063 4,836 Debenture Redemption Reserve 1,882 1,250 1,300 1,250 KfW reserve 169 209 261 291 Research and Development Reserve 20 20 20 20 Welfare Fund 9 9 Subtotal 5,995 6,735 7,627 8,900 Borrowings Loans Government of India 524 485 439 220 Banks 14,898 28,581 40,361 47,217 Financial Institutions 25,022 28,524 42,642 32,748 Foreign Currency Loans 4,453 9,287 10,870 10,458 Others Bonds and Debentures 43,305 44,922 43,647 63,292 Deposits Public deposits (including interest-bearing 3,187 9,318 9,084 12,445 cash securities) Subtotal 91,389 121,117 147,042 166,379

Current Liabilities and Provisions 8,944 8,855 8,876 11,322 Total 112,098 145,688 175,325 200,681 Assets Cash and Bank Balances Cash in hand and Balance with RBI 532 1,079 275 1,278 Balance with scheduled banks 9,647 9,594 8,385 8,201 Subtotal 10,179 10,674 8,660 9,478 Investments 499 2,517 2,293 2,099 Deferred Tax assets 539 Loans and Advances 99,112 130,233 162,779 186,442 Fixed Assets (at cost less depreciation) Land 90 87 86 93 Premises 442 440 466 482 Others 76 85 130 135 Subtotal 608 612 682 710 Current Assets (less cash & bank balances, loans 1,454 1,468 760 986 and advances) Miscellaneous expenditure not adjusted 247 184 151 427 Total 112,098 145,688 175,325 200,681 Source: Housing and Urban Development Corporation Limited. Appendix 9 Authorized Fiscal Year ending 31 March Table A9.1: Balance Sheet (Rs million) FINANCIAL STATEMENTS OF HOUSING AND URBAN DEVELOPMENT CORPORATION LIMITED40 Appendix 9 Item 1999 2000 2001 2002 Expenses Interest paid on deposits, borrowings, etc. 8,824 11,971 16,018 17,700 Establishment Expenses 257 253 374 476 Auditors' fees 0 0 1 1 Rent, taxes, insurance, lighting, etc. 95 164 173 165 Law charges 2 2 4 5 Postage, telegram, telex, and telephone 12 13 15 16 Stationery, printing, advertisement, etc. 30 45 36 42 Depreciation, amortization 46 50 47 91 Other expenditure 2,137 1,805 1,816 500 Balance of profit carried down 76 297 251 1,189 906 1,280 1,575 1,550 Total 12,384 15,881 20,309 21,732 Less: Provision for Income Tax 209 354 506 409 Balance Profit transferred to Appropriation Account 697 926 1,069 1,141

Total 906 1,280 1,575 1,550 Income Interest from loans, deposits, staff, and investment 10,072 14,101 18,425 20,469 Profit on sale of investments 0 2 2 Net income from consultancy 1 4 2 6 Fees and other charges 283 323 288 225 Other income 2,027 1,452 1,593 1,031 Total 12,384 15,881 20,309 21,732 Source: Housing and Urban Development Corporation Limited. (Rs million) Fiscal Year ending 31 March Table A9.2: Income Statements of Housing and Urban Development Corporation LimitedItem 1999 2000 2001 2002 Profit after Tax to Capital Employed (%) 0.68 0.68 0.64 0.64 Profit after Tax to Average Assets (%) 0.78 0.77 0.71 0.64 Debt-Equity Ratio 8.28 7.98 7.5 7.64 Capital Adequacy Ratio (%) 8.28 8.13 9.49 Debt Service Coverage Ratio 1.17 1.29 0.95 1.28 Source: Housing and Urban Development Corporation Limited Table A9.3: Ratio Analysis of Housing and Urban Development Corporation Limited Appendix 9 41 42 Appendix 10 1999 2000 2001 2002 Liabilities Capital Authorized Equity Shares 1,500 1,500 1,500 1,500 Preference Shares 700 700 700 700 Total 2,200 2,200 2,200 2,200 Issued and Paidup 1,191 1,191 1,201 1,217 Subtotal 1,191 1,191 1,201 1,217 Reserves Special Reserves No.1 3,185 2,935 2,694 2,344 Special Reserve No.2 2,020 3,020 4,310 6,060 General Reserve 4,510 4,976 6,200 7,651 Debenture Redemption Reserve 200 200 Share premium 8,248 8,248 8,506 8,937 Employee Stock Option Outstanding 18 27 24 Capital Redemption Reserve 500 500 500 500 Shelter Assistance Reserve 64 71 83 96 Capital Reserve 0 0 0 0 Subtotal 18,527 19,769 22,519 25,811 Borrowings Loans IBRD 2,617 2,341 2,066 1,790 USAID 1,428 1,368 1,221 1,075

IFC, Washington DC 725 725 725 CDC 924 739 536 336 ADB 3,696 5,474 5,587 4,705 Army Group Insurance 250 1,000 2,000 2,000 NHB 5,611 5,327 5,700 5,066 Syndicated Loan-yen 4,371 Scheduled banks 15,617 27,020 30,708 38,004 LIC 4,194 4,774 4,404 4,034 Others (Finance Lease) 4 Bonds and Debentures 10,650 18,880 29,253 41,262 Deposits Unsecured 52,473 62,185 72,374 84,777 Interest accrued and due 51 53 124 133 Subtotal 98,236 129,885 154,698 187,557 Current Liabilities and Provisions 8,114 10,587 12,728 14,271 Total 126,068 161,432 191,145 228,856 Assets Cash and Bank Balances Cash in hand and Balance with RBI 174 501 795 513 Balance with scheduled banks 5,454 9,310 7,583 8,529 Subtotal 5,628 9,812 8,378 9,042 Money at call and at short notice 950 1,000 1,700 Loans Individuals 56,315 72,394 95,850 125,659 Corporates 25,032 27,129 35,561 45,001 Others 846 1,107 836 1,032 Subtotal 82,193 100,630 132,247 171,692 Investments Securities of Central and State Governments 1,754 2,173 2,282 1,878 Stocks, shares, bonds, debentures and 9,359 10,142 7,895 6,701 securities for financing real estate projects Stocks, shares, bonds, debentures and 13,426 21,029 20,253 20,731 securities of other Institutions Subtotal 24,539 33,343 30,431 29,310 Deferred Tax assets 545 Loans and Advances 9,369 13,469 13,860 13,155 Bills Purchased, discounted/rediscounted Fixed Assets (at cost less depreciation) Land 129 138 366 369 Premises 732 797 2,019 3,205 Others 1,702 1,196 830 691

Subtotal 2,562 2,130 3,215 4,266 Current Assets (less cash & bank balances) 828 1,047 1,314 846 Total 126,068 161,432 191,145 228,856 Source: Housing Development Finance Corporation Limited. Item FINANCIAL STATEMENTS OF HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED Table A10.1: Balance Sheet Fiscal Year Ending 31 March (Rs million)(Rs million) Item 1999 2000 2001 2002 EXPENSES 18,712 16,896 14,369 Interest paid on deposits, borrowings, etc. 12,513 Establishment Expenses a 460 394 312 249 3 2 0 Directors', executive committee members' 0 fees & expenses 4 5 4 Auditors' fees 3 159 125 109 Rent, taxes, insurance, lighting, etc. 94 12 12 9 Law charges 6 80 67 52 Postage, telegram, telex, and telephone 49 110 107 73 Stationery, printing, advertisement, etc. 65 318 457 436 Depreciation, amortization 498 151 123 104 Other expenditure 82 83 80 80 Balance of profit carried down 80 6,909 5,557 4,608 3,889 27,002 23,824 20,155 Subtotal 17,527 1,109 820 590 Less: Provision for Income Tax 550 5,800 4,737 4,018 Balance of Profit transferred to Appropriation Account 3,339 6,909 5,557 4,608 TOTAL 3,889 INCOME 19,819 16,263 13,285 Interest on loans 11,551

760 969 507 income 641 4,716 operating income 3,617 1,122 other charges 690 77 income 59

1,217 475 4,782 1,028 58

1,485 Dividends 447 Lease rental 4,159 Other 757 Fees and 22 Other

27,002 23,824 20,155 Total 17,527 a includes Staff expenses and travelling expenses. Source: Housing Development Finance Corporation Limited. Appendix 10 43 Fiscal Year Ending 31 March Table A10.2: Income Statements of Housing Development Finance Corporation Limited44 Appendix 10 Item 1999 2000 2001 2002 Return on Equity (%) 17.8 20.0 21.2 22.9 Return on Average Assets (%) 3.1 3.0 2.9 3.0 Earning per share (Rs) 28.0 33.7 39.4 48.0 Book Value per Share (Rs) 165.6 176.0 198.0 222.0 Debt-Equity Ratio 5.0 6.2 6.5 6.7 Captial Adequacy Ratio 16.2 14.1 12.7 14.5 Debt-Service Coverage Ratio 2.4 2.5 1.7 Source : Housing Development Finance Corporation Limited. A10.3: Ratio Analysis of Housing Development Finance Corporation LimitedAppendix 11 45 Table A11.1: Status of Compliance with Major Loan Covenants – National Housing Bank Covenant Reference in Loan Document Remarks The guarantor and the borrower will execute the action plan to the extent that actions thereunder are applicable to or the responsibility of the guarantor or the borrower. Loan Agreement (LA), Schedule 3, para. 1 Partially complied with. The guarantor and the borrower will ensure that any involuntary resettlement resulting from the implementation of any qualified proposal or subproject and compensation paid thereof are undertaken in accordance with Asian Development Bank (ADB) policy

and requirements and to ADB’s satisfaction. LA, Schedule 3, para. 2 Not applicable. The borrower will cooperate in implementing a program for benefit monitoring and evaluation (BME) of the Project, encompassing timely realization of benefits and completion of physical and other aspects of the Project, especially in respect of households and cost recovery. LA, Schedule 3, para. 3 (a) Not complied with. BME activities will be turned over to the qualified enterprises and the result of BME incorporated into a project evaluation to be undertaken after project implementation. Baseline conditions will be established when qualified housing proposals and subprojects are prepared. The BME will be carried out in accordance with ADB’s Benefit, Monitoring, and Evaluation Handbook and tailored to meet project conditions. The borrower will provide ADB with the results of the BME in the first quarterly report for each year, referred to in Section 5.05 (b) of the Loan Agreement. LA, Schedule 3, para. 3 (b) Not complied with. Except as ADB may otherwise agree, the borrower will submit to ADB for prior approval the first five qualified housing proposals. LA, Section 3.03 Complied with. The borrowers will ensure that subloans are made only to state and municipal agencies, cooperatives, or others that (i) are not delinquent or otherwise in arrears in repayment of other debt obligations; and (ii) are from those states or union territories that are taking or have agreed to take steps to reduce stamp duties on real estate transactions and amend the Rent Control Laws, consistent with the Action Plan. LA, Section 4.04 Complied with. 46 Appendix 11 Covenant Reference in Loan Document Remarks The borrower will always protect itself against any loss resulting from changes in the rate of exchange between the rupee and currency or currencies in which the

borrower’s outstanding money obligations will have to be met. LA, Section 5.02 Complied with. The borrower will ensure that all funds, including localcurrency funds, in addition to the loan proceeds, and other resources that are required for the Project by qualified enterprises to carry out their respective Qualified Housing Proposals and Subprojects will be available to such qualified enterprises promptly as needed. LA, Section 5.03 Complied with. The borrower will maintain records and accounts adequate to record the progress of the Project and of each Qualified Housing Proposal and Subproject (including the cost thereof) and to reflect, in accordance with consistently maintained sound principles, the operations and financial condition of the borrower. LA, Section 5.04 Partially complied with. The borrower will furnish to ADB all such reports and information as ADB will reasonably request concerning (i) the loan and the expenditure of the proceeds and maintenance of the service thereof; (ii) the Project; (iii) qualified enterprises, Qualified Housing Proposals and Subprojects, and subloans; (iv) administration, operations, and financial condition of the borrower; and (v) any other matters relating to the purposes of the loan. LA, Section 5.05 (a) Partially complied with. Without limiting the generality of the foregoing, the borrower will furnish to ADB quarterly reports on the execution of the Project and on the operation and management of the borrower. Such reports will be submitted in such form and in such detail and within such a period as ADB will reasonably request, and will indicate, among other things, progress made and problems encountered during the quarter under review, steps taken and proposed to be taken to remedy these problems, and a proposed program of activities and expected progress during the following quarter. LA, Section 5.05 (b) Complied with. Appendix 11 47 Covenant Reference in Loan Document Remarks

Promptly after the closing date for withdrawals from the loan account, in any event not later than 3 months after the said closing date or such later date as may be agreed on for this purpose between ADB and the borrower, the borrower will prepare and furnish to ADB a report, in such form and in such detail as ADB will reasonably request, on the utilization of the loan, the execution of the qualified housing proposals and subprojects, their costs, the performance by the borrower of its obligations under this Loan Agreement and the accomplishment of the purposes of the loan. LA, Section 5.05 (c) Complied with. The borrower will have its account and financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate audited standards consistently applied, by independent auditors whose qualifications, experience, and terms of reference are acceptable to ADB; and will, promptly after their preparation but in any event not later than 12 months after the close of the financial year to which they relate, furnish to ADB (i) certified copies of the audited accounts and financial statements and (ii) the report of the auditors relating thereto (including the auditors’ opinion on the use of loan proceeds and compliance with the covenants of this loan agreements as well as on the use of procedures for the imprest account and statement of expenditure, all in the English language. The borrower will furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB will from time to time reasonably request. LA, Section 5.06 (a) (i) Complied with. (ii) Not complied with. The borrower will enable ADB’s representatives to inspect any Qualified Enterprise, any Qualified Housing Proposal and Subproject, goods financed out of the proceeds of the Loan, and any relevant records and documents maintained by the borrower. LA, Section 5.07 Complied with. 48 Appendix 11 Covenant Reference in Loan Document Remarks

The borrower will at all times conduct its business in accordance with sound administrative, financial, environmental, business, and housing practices, and under the supervision of competent and experienced management and personnel. LA, Section 5.08 (b) Complied with. Except as ADB and the borrower may otherwise agree, the borrower will not sell, lease, or otherwise dispose of any of its assets, except in the ordinary course of its business. LA, Section 5.08 ( c) Complied with. Before establishing or acquiring any subsidiary, the borrower will inform ADB of any such action. LA, Section 5.08 (d) Complied with. The borrower will keep ADB informed of any material event having a substantial and adverse impact on the borrower’s administrative, financial equity, and lending operations, including decisions resulting from judicial actions and other forms of litigation. LA, Section 5.08 (e) Complied with. Except as ADB and the borrower may otherwise agree, the borrower will maintain a ratio of the consolidated debt to consolidated equity not higher than 15:1. LA, Section 5.09 Complied with. Except as ADB may otherwise agree, the borrower will ensure that the consolidated internal cash generation for debt service for each financial year will be at least 1.2 times the consolidated debt-service requirement for that financial year. LA, Section 5.10 Complied with. The borrower undertakes that, except as ADB and the borrowers may otherwise agree, (i) if the borrower and any subsidiary create any lien on any of their assets as security for any debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan, and the borrower, in creating or permitting the creation of any such lien, will make express provision to that effect; and (ii) if any statutory lien is created on any assets of the borrower or any subsidiary as security for any debt, the borrower will grant to ADB an equivalent lien satisfactory to ADB. LA, Section 5.12 (a) Complied with. Appendix 11 49 Table A11.2: Status of Compliance with Major Loan Covenants – Housing and Urban Development Corporation Limited

Covenant Reference in Loan Document Remarks The guarantor and the borrower will execute the action plan to the extent that actions thereunder are applicable to or the responsibility of the guarantor or the borrower. Loan Agreement (LA), Schedule 3, para. 1 Partly complied with. The guarantor and the borrower will ensure that any involuntary resettlement resulting from the implementation of any qualified proposal or subproject and compensation paid thereof are undertaken in accordance with Asian Development Bank (ADB) policy and requirements and to ADB’s satisfaction. LA, Schedule 3, para. 2 Not applicable. The borrower will cooperate in implementing a program for benefit monitoring and evaluation (BME) of the Project, encompassing timely realization of benefits and completion of physical and other aspects of the project, especially in respect of households and cost recovery. LA, Schedule 3, para. 3 (a) Not complied with. BME activities will be turned over to the qualified Enterprises and the result of BME incorporated into a project evaluation to be undertaken after project implementation. Baseline conditions will be established when qualified housing proposals and Subprojects are prepared. The BME will be carried out in accordance with ADB’s Benefit, Monitoring, and Evaluation Handbook, and carefully tailored to meet project conditions. The borrower will provide ADB with the results of the BME in the first quarterly report for each year, referred to in Section 5.05 (b) of the Loan Agreement. LA, Schedule 3, para. 3 (b) Not complied with. The borrower will ensure that all subprojects conform to the requirements of ADB in respect of procurement, environment, resettlement, and compensation, among other

requirements. More specifically, the subproject will be selected on the basis of such criteria as may be agreed to by ADB, including the following: (i) significant development impact on low-income groups, with preference to women, (ii) significant demonstration impact such that other cities, areas, institutions, or beneficiaries wish to participate in similar subprojects, (iii) cost-effectiveness based on a large number of beneficiaries per unit cost, LA, Schedule 3, para. 4 The borrower complied with the LA’s stipulation of minimum lending to lowincome households. In certain locations, the review missions noticed emphasis on ownership by women. 50 Appendix 11 Covenant Reference in Loan Document Remarks (iv) potential of replicability in other parts of the guarantor based on ease of implementation and financial sustainability, (v) commitment of executing and participating institutions, including participation of beneficiaries as well as private institutions, and (vi) willingness and preparedness of state and local governments to implement subprojects quickly and in accordance with the project and action plan. Increased availability of housing finance encouraged demand from beneficiaries. Subproject proposals to be submitted to ADB for approval will include a detailed description of the inputs and their costs; participation of households and their responsibilities;

financing and cost recovery; any resettlement or compensation issues, as well as proposed resolution of such issues; implementation plan including institutional and household responsibilities; initial environmental examination of the subproject; and a long-term maintenance plan. Such subproject proposal will also include proposed measures to ensure sustainability and the subproject’s usefulness as a pilot. Except as ADB may otherwise agree, the borrower will submit to ADB for prior approval the first five qualified housing proposals. LA, Section 3.03 Complied with. The borrowers will ensure that subloans are made only to state and municipal agencies, cooperatives, or others that (i) are not delinquent or otherwise in arrears in repayment of other debt obligations; and (ii) are from those states or union territories that are taking or have agreed to take steps to reduce stamp duties on real estate transactions and amend the Rent Control Laws, consistent with the Action Plan. LA, Section 4.04 Complied with. The borrower will carry out the Project with due diligence and efficiency and in conformity with sound banking, administrative, financial, engineering, environmental, business, and housing practices. LA, Section 5.01 (a) Complied with. The borrower will always protect itself against any loss resulting from changes in the rate of exchange between the rupee and the currency or currencies in which the borrower’s outstanding money obligations will have to be met. LA, Section 5.02 Complied with. Appendix 11 51 Covenant Reference in Loan Document Remarks The borrower will ensure that all funds, including localcurrency funds, in addition to the loan proceeds, and other resources that are required for the Project by qualified

Enterprises to carry out their respective qualified housing proposals and Subprojects will be available to such qualified Enterprises promptly as needed. LA, Section 5.03 Complied with. The borrower will maintain records and accounts adequate to record the progress of the Project and of each qualified housing Proposal and Subproject (including the cost thereof) and to reflect in accordance with consistently maintained sound accounting principles, the operations and financial condition of the borrower. LA, Section 5.04 Insufficient compliance. The borrower will furnish to ADB all such reports and information as ADB will reasonably request concerning the loan and the expenditure of the proceeds and maintenance of the service thereof; (ii) the project; (iii) the qualified Enterprises, the qualified housing proposals and Subprojects, and the sub loans; (iv) the administration, Operations and financial condition of the borrower; and (v) any other matters relating to the purposes of the Loan. LA, Section 5.05 (a) Partly complied with. Without limiting the generality of the foregoing, the borrower will furnish to ADB quarterly reports on the execution of the Project and on the operation and management of the borrower. Such reports will be submitted in such form and in such detail and within such a period as ADB will reasonably request, and will indicate, among other things, progress made and problems encountered during the quarter under review, steps taken and proposed to be taken to remedy these problems, and proposed programe of activities and expected progress during the following quarter. LA, Section 5.05 (b) Partly complied with. Promptly after the closing date for withdrawals from the loan account, in any event not later than three months after the said closing date or such later date as may be agreed for this purpose between ADB and the borrower, the borrower will prepare and furnish to ADB a report, in such form and in such detail as ADB will reasonably request, on the utilization of the loan, the execution of the qualified

housing proposals and subprojects, their costs, the performance by the borrower of its obligations under this Loan Agreement and the accomplishment of the purposes of the loan. LA, Section 5.05 (c) Complied with. 52 Appendix 11 Covenant Reference in Loan Document Remarks The borrower will have its account and financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate audited standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and will, promptly after their preparation but in any event not later than 12 months after the close of the financial year to which they relate, furnish to ADB (i) certified copies of the audited accounts and financial statements and (ii) the report of the auditors relating thereto (including the auditors’ opinion on the use of loan proceeds and compliance with the covenants of this loan agreements as well as on the use of procedures for the imprest account and statement of expenditure, all the English language. The borrower will furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB will from time to time reasonably request. LA, Section 5.06 (a) (i) Complied with. (ii) Not complied with . The borrower will enable ADB’s representatives to inspect any qualified Enterprise, any qualified housing Proposal and Subproject, the goods financed out of the proceeds of the Loan, and any relevant records and documents maintained by the borrower. LA, Section 5.07 Complied with. The borrower will, promptly as required, take all action within its powers to maintain its corporate existence, to carry on its operations and to acquire, maintain and renew all rights, properties, powers, privileges and franchises which are necessary in the carrying out of the project or in the conduct of its business.

LA, Section 5.08 (a) Complied with. The borrower will at all times conduct its business in accordance with sound administrative, financial, environmental, business and housing practices, and under the supervision of the competent and experienced management and personnel. LA, Section .08 (b) Complied with. Except as ADB and the borrower may other agree, the borrower will not sell, lease or otherwise dispose of any of its assets, except in the ordinary course of its business. LA, Section .08 (c) Complied with. Prior to establishing or acquiring any subsidiary, the borrower will inform ADB of any such action. LA, Section 5.08 (d) Complied with. Appendix 11 53 Covenant Reference in Loan Document Remarks The borrower will keep ADB informed of any material event having a substantial and adverse impact on its administrative, financial equity and lending operations, including decisions resulting from judicial actions and other forms of litigation. LA, Section 5.08 (e) Complied with. Except as ADB and the borrower may otherwise agree, the borrower will maintain a ratio of the consolidated debt of the borrower to the consolidated equity of the borrower not higher than 15:1. LA, Section 5.09 Complied with. Except as ADB may otherwise agree, the borrower will undertake its operations so as to ensure that the consolidated internal cash generation for debt service for each financial year will be at least 1.2 times the consolidated debt-service requirement for that financial year. LA, Section 5.10 Partly complied with.

The borrower undertakes that, except as ADB and the borrowers may otherwise agree, (i) if the borrower and any subsidiary create any lien on any of its assets as security for any debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan and the borrower, in creating or permitting the creation of any such lien, will make express provision to that effect; and (ii) if any statutory lien will be created on any assets of the borrower or any subsidiary as security for any debt, the borrower will grant to ADB an equivalent lien satisfactory to ADB. LA, Section 5.12 (a) Complied with. 54 Appendix 11 Table A11.3: Status of Compliance with Major Loan Covenants – Housing Development Finance Corporation Limited Covenant Reference in Loan Document Remarks The guarantor and the borrower will execute the action plan to the extent that actions thereunder are applicable to or the responsibility of the guarantor or the borrower. Loan Agreement (LA), Schedule 3, para. 1 Partly complied with. The guarantor and the borrower will ensure that any involuntary resettlement resulting from the implementation of any qualified proposal or subproject and compensation paid thereof are undertaken in accordance with Asian Development Bank (ADB) policy and requirements and to ADB’s satisfaction. LA, Schedule 3, para. 2 Not applicable. The borrower will cooperate in implementing a program for benefit monitoring and evaluation (BME) of the Project, encompassing timely realization of benefits and completion of physical and other aspects of the project, especially in respect of households and cost recovery. LA, Schedule 3, para. 3 (a) Not complied with. BME activities will be turned over to the qualified Enterprises and the result of BME incorporated into a

project evaluation to be undertaken after project implementation. Baseline conditions will be established when qualified housing proposals and Subprojects are prepared. The BME will be carried out in accordance with ADB’s Benefit, Monitoring, and Evaluation Handbook, and carefully tailored to meet project conditions. The borrower will provide ADB with the results of the BME in the first quarterly report for each year, referred to in Section 5.05 (b) of the Loan Agreement. LA, Schedule 3, para. 3 (b) Not complied with. The borrower will ensure that all subprojects conform to the requirements of ADB in respect of procurement, environment, resettlement, and compensation, among other requirements. More specifically, the subproject will be selected on the basis of such criteria as may be agreed to by ADB, including the following: (i) significant development impact on low-income groups, with preference to women, (ii) significant demonstration impact such that other cities, areas, institutions, or beneficiaries wish to participate in similar subprojects, (iii) cost-effectiveness based on a large number of beneficiaries per unit cost, LA, Schedule 3, para. 4 The borrower complied with the LA’s stipulation of minimum lending to lowincome households. In certain locations, the review missions noticed emphasis on ownership by women. Appendix 11 55 Covenant Reference in Loan Document Remarks (iv) potential of replicability in other parts of the guarantor based on ease of implementation and financial

sustainability, (v) commitment of executing and participating institutions, including participation of beneficiaries as well as private institutions, and (vi) willingness and preparedness of state and local governments to implement subprojects quickly and in accordance with the project and action plan. Increased availability of housing finance encouraged demand from beneficiaries. Subproject proposals to be submitted to ADB for approval will include a detailed description of the inputs and their costs; participation of households and their responsibilities; financing and cost recovery; any resettlement or compensation issues, as well as proposed resolution of such issues; implementation plan including institutional and household responsibilities; initial environmental examination of the subproject; and a long-term maintenance plan. Such subproject proposal will also include proposed measures to ensure sustainability and the subproject’s usefulness as a pilot. Except as ADB may otherwise agree, the borrower will submit to ADB for prior approval the first five qualified housing proposals. LA, Section 3.03 (a) Complied with. The borrowers will ensure that subloans are made only to state and municipal agencies, cooperatives, or others that (i) are not delinquent or otherwise in arrears in repayment of other debt obligations; and (ii) are from those states or union territories that are taking or have agreed to take steps to reduce stamp duties on real estate transactions and amend the Rent Control Laws, consistent with the Action Plan. LA, Section 4.04 Complied with. The borrower will carry out the Project with due diligence and efficiency and in conformity with sound banking, administrative, financial, engineering, environmental, business, and housing practices.

LA, Section 5.01 (a) Complied with. The borrower will always protect itself against any loss resulting from changes in the rate of exchange between the rupee and the currency or currencies in which the borrower’s outstanding money obligations will have to be met. LA, Section 5.02 Complied with. 56 Appendix 11 Covenant Reference in Loan Document Remarks The borrower will ensure that all funds, including localcurrency funds, in addition to the loan proceeds, and other resources that are required for the Project by qualified Enterprises to carry out their respective qualified housing proposals and Subprojects will be available to such qualified Enterprises promptly as needed. LA, Section 5.03 Complied with. The borrower will maintain records and accounts adequate to record the progress of the Project and of each qualified housing Proposal and Subproject (including the cost thereof) and to reflect in accordance with consistently maintained sound accounting principles, the operations and financial condition of the borrower. LA, Section 5.04 Complied with in regard to retain loan portfolio. Compliance with other loan portfolio needs improvement. The borrower will furnish to ADB all such reports and information as ADB will reasonably request concerning the loan and the expenditure of the proceeds and maintenance of the service thereof; (ii) the project; (iii) the qualified Enterprises, the qualified housing proposals and Subprojects, and the sub loans; (iv) the administration, Operations and financial condition of the borrower; and (v) any other matters relating to the purposes of the Loan. LA, Section 5.05 (a) Partly complied with. Without limiting the generality of the foregoing, the borrower

will furnish to ADB quarterly reports on the execution of the Project and on the operation and management of the borrower. Such reports will be submitted in such form and in such detail and within such a period as ADB will reasonably request, and will indicate, among other things, progress made and problems encountered during the quarter under review, steps taken and proposed to be taken to remedy these problems, and proposed programe of activities and expected progress during the following quarter. LA, Section 5.05 (b) Partly complied with. Promptly after the closing date for withdrawals from the loan account, in any event not later than three months after the said closing date or such later date as may be agreed for this purpose between ADB and the borrower, the borrower will prepare and furnish to ADB a report, in such form and in such detail as ADB will reasonably request, on the utilization of the loan, the execution of the qualified housing proposals and subprojects, their costs, the performance by the borrower of its obligations under this Loan Agreement and the accomplishment of the purposes of the loan. LA, Section 5.05 (c) Complied with. Appendix 11 57 Covenant Reference in Loan Document Remarks The borrower will have its account and financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate audited standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and will, promptly after their preparation but in any event not later than 12 months after the close of the financial year to which they relate, furnish to ADB (i) certified copies of the audited accounts and financial statements and (ii) the report of the auditors relating thereto (including the auditors’ opinion on the use of loan proceeds and compliance with the covenants of this loan agreements as well as on the use of procedures for the imprest account and statement of expenditure, all the English language. The borrower will

furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB will from time to time reasonably request. LA, Section 5.06 (a) (i) Complied with. (ii) Partially complied with . The borrower will enable ADB’s representatives to inspect any qualified Enterprise, any qualified housing Proposal and Subproject, the goods financed out of the proceeds of the Loan, and any relevant records and documents maintained by the borrower. LA, Section 5.07 Complied with. The borrower will, promptly as required, take all action within its powers to maintain its corporate existence, to carry on its operations and to acquire, maintain and renew all rights, properties, powers, privileges and franchises which are necessary in the carrying out of the project or in the conduct of its business. LA, Section 5.08 (a) Complied with. The borrower will at all times conduct its business in accordance with sound administrative, financial, environmental, business and housing practices, and under the supervision of the competent and experienced management and personnel. LA, Section 5.08 (b) Complied with. Except as ADB and the borrower may other agree, the borrower will not sell, lease or otherwise dispose of any of its assets, except in the ordinary course of its business. LA, Section 5.08 (c) Complied with. Prior to establishing or acquiring any subsidiary, the borrower will inform ADB of any such action. LA, Section 5.08 (d) Complied with. 58 Appendix 11 Covenant Reference in Loan Document Remarks

The borrower will keep ADB informed of any material event having a substantial and adverse impact on its administrative, financial equity and lending operations, including decisions resulting from judicial actions and other forms of litigation. LA, Section 5.08 (e) Complied with. Except as ADB and the borrower may otherwise agree, the borrower will maintain a ratio of the consolidated debt of the borrower to the consolidated equity of the borrower not higher than 15:1. LA, Section 5.09 Complied with. Except as ADB may otherwise agree, the borrower will undertake its operations so as to ensure that the consolidated internal cash generation for debt service for each financial year will be at least 1.2 times the consolidated debt-service requirement for that financial year. LA, Section 5.10 Complied with. The borrower undertakes that, except as ADB and the borrowers may otherwise agree, (i) if the borrower and any subsidiary create any lien on any of its assets as security for any debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and interest and other charges on, the Loan and the borrower, in creating or permitting the creation of any such lien, will make express provision to that effect; and (ii) if any statutory lien will be created on any assets of the borrower or any subsidiary as security for any debt, the borrower will grant to ADB an equivalent lien satisfactory to ADB. LA, Section 5.12 (a) Complied with.