Housing and Space Management

Housing And Space Management 3(2+1)

Lesson 32: Housing Finance – Public And Private Institutions

Housing Finance Institutions In India

1. Housing and Urban Development Corporation (HUDCO)
   • Housing & Urban Development Corporation Ltd. (HUDCO) is a public sector company fully owned by Govt. of India for financing of housing and urban infrastructure activities in India.
   • HUDCO was incorporated on April 25, 1970 under the Companies Act 1956. The cardinal objective of HUDCO is to undertake housing and urban infrastructure development programmes in the country, provide long-term finance for construction of houses for residential purposes in urban & rural areas and finance or undertake, the setting up of the new or satellite towns and industrial enterprise for building material.
   • It mobilizes financial resources from institutional agencies like LIC, GIC, UTI, commercial banks, international assistance as well as through public deposits.


2. National Housing Bank:
   • The National Housing Bank (NHB) is a state owned bank and regulation authority in India, created on July 8, 1988. It is owned by the Reserve Bank of India, was established to promote private real estate acquisition.
   • NHB has been established with an objective to operate as a principal agency to promote housing finance institutions both at local and regional levels and to provide financial and other support incidental to such institutions and for matters connected therewith.
   • Apart from the premier institutions like Housing Development Finance Corporation Ltd (HDFC) and LIC Housing Finance Ltd, it extends support to other housing finance institutions like Can-Fin Homes Ltd, GIC Grih Vitta Ltd., SBI Home Finance Ltd., etc. who extends housing loans to individuals and group housing schemes.
   • Reserve Bank of India gives directives to different private sector banks as well as public housing finance companies for Home Loans.


3. Housing Development Finance Corporation:
   • HDFC is a unique example of a housing finance company which has demonstrated the viability of market-oriented housing finance in a developing country.
   • It is viewed as an innovative institution and a market leader in the housing finance sector in India. The World Bank considers HDFC a model private sector housing finance company in developing countries and a provider of technical assistance for new and existing institutions, in India and abroad.
   • The HDFC advances housing loans to individuals for (a) buying or constructing houses, (b) extension or improvement of existing houses, (c) acquiring a self-contained flat in an existing or proposed cooperative society/ apartment owners association and (d) independent bungalow / row house.
   • Loan can be availed of up to a maximum of 85% of the cost of the property including the cost of land.
   • The maximum loan to an individual can be Rs. 25 Lakh.
   • Although the equated monthly installment of repayment is over 15 year’s period, the repayment does not ordinarily extend beyond the age of retirement or 65 years of age of the borrower, whichever is earlier.


4. Insurance organizations / corporations
   • The Life Insurance Corporation (LIC) and Group Insurance Corporation (GIC) support housing activity both directly and indirectly.
   • The LIC promoted a subsidiary for the purpose, namely the LIC Home Finance Ltd.
   • The GIC supports housing almost exclusively indirectly by subscribing to bonds/debentures floated by the HUDCO and state housing boards.
   • A housing finance subsidiary called the GIC Housing Finance Ltd., in July1990 to enable it to lend directly to individuals.


5. Specialized Housing Finance Institutions
   • There are certain institutions termed as ‘Specialized HFI’, which cater only to the needs of the housing sector.
   • They can further be classified as housing finance companies promoted in the public / private / joint sectors and cooperative housing finance societies.
   • A lead player in Housing Finance Company (HFC) category is the HDFC Ltd. It lends, mainly for new residential housing to individuals, groups of individuals, and individual members of cooperative societies.
   • Besides the HDFC, a number of HFCs have been sponsored by banks such as SBI Home Finance Ltd, Canfin Homes Ltd, IndBank Housing Finance Ltd, Citihomes, Vijaya Home Loans etc.


6. Commercial banks:
   • Commercial banks lending to individuals for housing emerged in the wake of the report of the working group on ‘Role of Banking System in Providing Finance for Housing Schemes’.
   • They have been lending to the housing-sector based on annual credit allocations made by the RBI.


7. Cooperative banks:
   • The cooperative banking sector consists of State Cooperative Banks, district central cooperative banks and primary urban cooperative banks.
   • Cooperative banks finance individuals, cooperative group housing societies, housing boards and others who undertake housing projects for Economically Weaker Sections (EWS), Lower Income Group (LIG) and Middle Income Group (MIG).


8. Commercial and Corporate Banks:
   • Home Finance wings of Commercial and Corporate Banks provide housing finance to individuals, corporate bodies and promoters and developers.