Housing Finance

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Presented by: Priya Jain PGDM IV Semester BBDNITM, Lucknow HOUSING FINANCE INDUSTRY IN INDIA «a seminar on business policy report presentation

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APPROACH INTRODUCTION ENVIRONMENTAL ANALYSIS MARKET OF HOUSING FINANCE AND RELATED ISSUES RECOMMENDATIONS AND SUGGESTIONS

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INTRODUCTION

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HOUSING FINANCE Housing finance connotes finance (or loans) for meeting the various needs relating to housing, namely: a) Purchase of a flat or house b) Acquisition of a plot, and construction of a house c) Construction of a house d) Extension of a house e) Repairs, renovation and upgradation of a house/flat f) Taking over housing loans from other banks/housing finance companies. Create & meet a growing housing demand Reduce poverty Prevent slum proliferation Engine of equitable economic growth Take part in financial sector liberalization IMPORTANCE

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STRUCTURE RBI NATIONAL HOUSING BANK (NHB) Commercial Banks Housing Finance Companies Cooperative Institutions HUDCO HDFC Bank Sponsored Insurance Companies sponsored Private Sector Companies Apex Cooperative Housing Federations State Cooperative Banks Urban Cooperative Banks State Cooperative Agri. & Rural Banks

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1951 2003 2020 2015 1980 entry stage growth stage maturity stage saturation stage LIFE CYCLE Simple Segmentation Small Product Range Random Customer Segmentation Substantial National Advertising Measurement of sales success by key figures Less examination of customer satisfaction Credit process compatible to segmentation Regular customer calls Increasing defaults

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BUSINESS CYCLE

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ENVIRONMENTAL ANALYSIS

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INFLUENCING FACTORS SOCIO-CULTURAL Lifestyle changes Family break-ups Growing population Regional shifts Increase in working force Impact of generation Y ECONOMIC TECHNOLOGY REGULATORY Reserve Bank of India requirements National Housing Board requirements Fiscal concessions Interest rates Lower output volatility Inflation Hardware improvements Software improvements Econometric modelling

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PORTER¶S FIVE FORCES ANALYSIS RIVALRY WITHIN THE INDUSTRY BARGAINING POWER OF SUPPLIERS THREAT OF NEW ENTRANTS BARGAINING POWER OF CUSTOMERS THREAT OF SUBSTITUTES HIGH HIGH MEDIUM MEDIUM HIGH

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SWOT ANALYSIS STRENGTHS WEAKNESSES OPPORTUNITIES THREATS An active mainstream sector Effective regulatory framework Interest rate war persistent Increasing Urbanization Housing microfinance has potential Tax rebates on house loans Falling interest rates Lower transaction levels in realty sector High switching costs of customers NHB¶s refinance assistance mainly directed towards developed players Extensive network of regional banks, microfinance institutions, cooperatives, credit unions and rural banks Dilution in due diligence on part of lenders is a often seen Lack of uniformity of norms Increase in default rates Lower SLR and CRR with enhance liquidity, so more loans can be offered Higher cost of home ownership is mainly dampening the demand at other end

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VALUE CHAIN ANALYSIS PRODUCT DEVELOPMENT BACK ±END PROCESSING RISK MANAGEMENT DISTRIBUTION TECHNOLOGY market knowledge best practice transfer introducing successful market vehicles to better target new segments with innovative products clearance settlement efficiency and cost management allows for price flexibility,

creating competitive advantage credit controls CRM expertise experience in managing risk allows companies to charge high premiums while managing their NPL¶s online loaning cross selling expanding branch networks and distribution platforms improves direct access to customer base CUSTOMER BASE

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MARKET OF HOUSING FINANCE & RELATED ISSUES

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INDIA ± a potential market HOUSING SHORTGAGE CATEGORIES OF HOUSING LOAN DEMAND

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INDIA ± a potential market MORTGAGE PENETRATION HOUSING FINANCE DISBURSEMENT

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MARKET SHARE

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FUNDING SOURCES Various sources of funding for housing finance companies include : Public Deposits Term Deposits Institutional Borrowings (domestic and international) Capital Markets Foreign Currency Convertible Bonds Refinance from NHB Securitization

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MARKETING & DISTRIBUTION Aggressive but mature marketing strategies pursued Extensive use of electronic and print media and mobile telephony Co-hosting or sponsoring property exhibitions Entering in special tie-ups with developers Roping in celebrities as brand ambassadors ³Feet-on-street´ selling approach Emergence of a new distribution arm ³Direct Selling Agents´ Cross selling of products and services

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RECOMMENDATIONS & SUGGESTIONS

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RECOMMENDATIONS BROAD BASING THE MARKET Mortgage insurance Need for an independent floating rate benchmark Introduction of new products REGULATORY ISSUES Need for a level playing field Removal of conflicts of interests Greater uniformity of standards Asset liability management FUNDING ISSUES Need for diversified resources Enhancement of exposure norms BUILDING AN INFORMATION DATABASE BETTER ACCESS TO CREDIT HISTORY OF CLIENT

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CHALLENGES HOW TO GET TO TRUE POOR ? Microfinance for housing Remittance mortgages IMPACTING THE SUPPLY SIDE Increase house production via developer financing Ensure affordability CREATING NEW PRODUCTS/RELATIONSHIPS TO EXPAND IMPACT POLICY CHANGES Affordable land use and development rules Smarter housing finance related subsidies Efficient registration of property titles and liens Framework for long term mortgage securities

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HOUSING FINANCE INDUSTRY IN INDIA «³better a hut on the ground than a castle in the air´ THE END

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