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Construction finance: lenders perspective

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

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  1. Construction finance: lenders perspective Lower and Middle Income Segment

  2. India - Preview Total Population of India-1.5 billion

  3. 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

  4. 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

  5. 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

  6. 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

  7. 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

  8. Our Initiatives in affordable housing

  9. Financing “Self” Construction on owned land

  10. “Plot Loans” with construction finance

  11. Ready Unit finance

  12. Finance for layout development & construction

  13. Project finance for apartment construction

  14. Project finance for mass affordable housing

  15. 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.

  16. 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

  17. 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

  18. Thank You Rajeev.Sathe@dhfl.com

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