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Construction finance: lenders perspective. Lower and Middle Income Segment. India - Preview. Total Population of India-1.5 billion. Annual Household Income (in US$)*. Rich (Above 115,000 ). 2. 9. High Income (57,000–115,000 ). 20. Population (million). 48. 33. Working class
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Construction finance: lenders perspective Lower and Middle Income Segment
India - Preview Total Population of India-1.5 billion
Annual Household Income (in US$)* Rich (Above 115,000) 2 9 High Income (57,000–115,000) 20 Population (million) 48 33 Working class (10,200–23,000) 221 120 Needy (Below 10,200) 726 404 2001-02 2009-10(E) 2005-06 613 * In PPP terms 9 17 74 285 710 India - Preview Economic Classification
Need for ‘Affordable Housing’ • Huge gap between demand & supply • Developer focus on Higher Income Groups in Urban areas with higher margins. • Un-regulated/Un-authorised/ Un-planned housing units for the lower and middle income group • Inadequate infrastructure & basic amenities in Low-cost projects/ units • Inadequate access to affordable finance to the lower and middle income segment
The ‘Rural Story’… Migration from rural to urban areas • Attractive employment opportunities • Increase in family size • Poor availability of basic amenities for education, medical facilities, entertainment, lifestyle etc. • Aspirations for upward economic mobility • Significant “short haul” migration to smaller towns by persons moving to non-agricultural employment
Opportunities… Opportunities for developers and Lenders • Significant opportunities in tier II & III locations • Large untapped demand for affordable housing • Lower land cost and relatively stable prices • Adequate margins available to both • Good demand for well developed “basic” layouts in Gram panchayat areas abutting small towns • Lower risks as purchasers are end users not speculators or investors
Opportunities… Opportunities for developers and Lenders • “Sell and build” model for small units as opposed to “build and sell” lowers project selling risk • Lower project cost disperses lenders risks & lowers barriers to entry for smaller builders/developers • “Local” developers more in tune with local market • “Local” market fairly insulated from global swings • Remittances from larger urban centers create upgrade demand for family homes
DHFL Property Services • Tie-ups with various developers in tier II and III locations for project cost management and sales • Provide technical and legal support • Introduce technologies to reduce cost and time of construction • Help create proper amenities like roads, schools, hospitals, playground, clean drinking water, drainage etc.
Recommendations • ‘Mass Housing Scheme’ in the MIG and the LIG segments like MHADA and DDA initiatives with private developers for larger towns • Increasing availability of affordable housing close to workplace by regulating land use in newly developing townships & redevelopments • Support for infrastructure development in smaller towns and rural locations
Recommendations • Government subsidies and tax exemptions to developers and HFC’s in tier II & III locations • Provision of housing finance at a lower interest to individuals in the Low and middle income segment • Refinance from NHB to HFC’s to promote larger affordable housing schemes in urban and rural locations
Thank You Rajeev.Sathe@dhfl.com