The document discusses 10 different types of housing finance options in India including home purchase loans, home construction loans, home extension loans, land purchase loans, and loans for NRIs. It provides brief descriptions of each loan type, explaining their purpose and eligibility requirements. The types of housing loans available provide financing solutions for purchasing, building, renovating, or converting residential properties in India.

1. Housing finance types.
i. Home Purchase Loans
ii. Home Construction
Loans
iii. Home Extension Loans
iv. Home Conversion
Loans
v. Land Purchase Loans.
vi. Stamp Duty Loans
vii. Bridge Loans
viii.Balance Transfer Loans
ix. Re-finance Loans
x. Loans to NRIs

2. i. Home Purchase Loans:
Home Purchase Loans are the basic home loan
you can opt for purchasing new home. This type of
Home Loan is offered by all kinds of Banks and HFCs.
ii. Home Construction Loans:
Home Construction Loans are especially
meant for the construction of a new home. Formality of
availing this loan has a little different from the normal
Housing Loan. The plot on which the construction is being
erected is purchased within a period of one year, the cost
of the plot is then also included as the component for the
valuation of total cost of the property.
iii. Home Extension Loans:
Home Extension Loans is offered for
meeting the operating cost of alteration to an existing
building. Extension here means addition of an extra room
etc.

3. iv. Home Conversion Loans:
Home Conversion Loans are
offered to those who want finance for the purchase
of another home by converting the already existing
home and on which loan is already sanctioned.
Through this loan, the existing loan is transferred to
the new home including the extra amount required
and there is no need for pre-payment of the
previous loan.
v. Land Purchase Loans:
Land Purchase Loans can be
availed for purchasing land for both home
construction as well as investment purposes.
vi. Stamp Duty Loans:
Stamp Duty Loans is offered for
the payment of stamp duty in the transaction of the
property.

4. vii. Bridge Loans:
Bridge Loans are offered for selling the
existing home and purchasing of another. The bridge loan
assists in the finance of new home, until a buyer is found
for the old home.
viii. Balance-Transfer Loans:
Balance Transfer of the loan is the
transfer of the balance of an existing home loan at a
higher rate of interest (ROI) to either the same company
or another.
ix. Re-finance Loans:
Refinance loans are availed when a
loan from an organization at a particular ROI is dropping
leading to a loss. Then the option of swap of the loan can
be availed. One can avail this from either the same HFI or
other at the current rates of interest.
x. NRI Home Loans:
NRI Home Loans are meant for Non-
Resident Indians who wish to build or buy a home or

5. HOUSING FIGURES IN INDIA

6. Housing Market
• Short Supply of residential Category Housing shortage (Mn)
dwellings, existing since post
independence EWS 21.78
• In 2005 estimated demand is
209.5 million, supply is 189.7
LIG 2.89
Million
• Demand – Supply gap is
narrowing MIG + HIG 0.04
As per 11th 5 year plan
• - Shortage of 24.71 million Total 24.71
dwellings
• - Close to 99 % of shortage
in EWS & LIG segment
(Bill Longbrake Anthony T. Cluff Senior Policy Advisor Financial Services
Roundtable February 2008)

7. Housing Finance
• The value of total residential mortgage debt moved up from
USD 1.84 billion in 1994 to USD 12.26 billion in 2004, as in
2007 there were 7.1 million subprime loans ,constituting 13.3%
of total loans serviced.
• Interest rates on housing loans have fallen from a peak of 17%
in 1996 to 7.5% last fiscal making owning a home more
affordable.
• Traditionally housing finance was dominated by a handful of
private sector institutions.
• Salaried borrowers constitute the bulk of the clientele for the
financier in comparison to the self-employed borrowers
• Traditionally housing finance was dominated by a handful of
private sector institutions. These Housing Finance Companies
(HFCs) commanded 70% market share in FY99, which has
subsequently fallen to 50% in FY04.
• Banks now control 40% of this market

8. Government Policy & Objectives
• In the Tenth-Five-Year-Plan; a CAGR of 45%.
Prior to that, the Government of India was
generally not supportive of housing finance
through its policies.
• Larger allocation of public funds, fiscal incentives
and tax rebates on principal repayment and
Equated monthly instalments (EMIs) .
• A welcome move recently announced by the
government is that 100% Foreign Direct
Investment (FDI) in India would be allowed in
townships, housing, built-up infrastructure and
construction-development projects.
• A lot remains to be achieved with regard to issues
surrounding regularization of land records, urban
land ceiling act, rent control act etc.,

9. Summary Data for India FY94-FY04
94 95 96 97 98 99 00 01 02 03 04
1 Real GDP Growth % 5.9 7.25 7.34 7.84 4.79 6.51 6.06 4.37 5.78 3.99 8.51
2 Residential
mortgage debt USD (bn) 1.84 2.1 2.13 2.24 2.59 2.94 4.28 5.56 6.88 8.89 12.26
outstanding
Residential debt / GDP
3 Ratio % 0.58 0.61 0.58 0.56 0.62 0.67 0.91 1.19 1.45 1.74 2.21
4 Residential mortgage
debt USD 11.58 12.85 12.67 12.98 14.63 16.17 22.87 28.98 35.79 55.88 77.08
per household
5 No. of Households bn 159 163 168 172 177 182 187 192 192 198 203
6 Home ownership rate % 86.42 86.46 86.5 86.54 86.58 86.62 86.66 --- --- --- ---
Interest rates on
15.5 17 17 16 14.5 13.5 13 12.15 11.35 9.85 7.65
7 Housing loans %
Exchange Rates 31.37 31.4 33.45 35.5 37.16 42.07 43.33 45.68 47.69 48.4 45.97
8 --
(Central Statistical Organization- Government of India, Annual Economic Surveys tabled in the Indian
Parliament.)

10. Ideal Housing finance mechanism

12. BORROWERS/USERS
Supply of credit
• Housing credit portfolio
• Continuity of new lending
• Market shares
• Loan amounts + periods of redemption
Credit availability
• Collateral requirements
• Income ratios
• Number of customers
• Third party lending
Credit affordability
• Mortgage rates and fees
• Spreads and real interest rates
• Liquidity
• Interest rate risks

13. LENDERS/INVESTORS
Investment attractiveness
• Maturity of investment
• Share of institutional investors
• Yields
• Spreads and real interest rates
Security of funds
• Inflation and reinvestment risk
• Solvency
• Credit risks
• Capital adequacy
Profitability for shareholders
• Cost efficiency
• Net income and margins
• Return on equity assets
• Cost-income ratios

14. GOVERNMENT/ POLICY MAKERS
Achievable indirect benefits
• Housing outcomes and national income
• Financial depth
Economic prerequisites
• Macro-economic stability
• Willingness
Institutional prerequisites
• Legislation
• Regulation and supervision
Sector – specific prerequisites
• Degree of financial development
• Quality of residential infrastructure,
construction sector and rent level
• Efficient Housing Finance System Home-
ownership promotions

15. Credit Crisis in housing industry
• Stagflation =Recession + Inflation
• Recession= General slowdown in economic activity.
• Inflation = Prices go up , since worth of money is less.

16. Credit Crisis?
It is a world wide financial fiasco involving the terms:
• Sub prime mortgages
• Collateralized debt obligations..
• Credit default swaps.
Who is affected?
“EVERYONE”

17. How?
Home
owners
(mortgages).
Banks and
brokers
“WALL
STREET”
Investors
(Money)
• Mortgages represent houses.
• Money represents institutions(pension funds, insurance companies, mutual
funds etc.)

18. Earlier?
• Investors , put their money in federal reserve to get treasury bills
and obtain good rate of return.
• After 9/11, the interest rate was turned to only 1% resulting in bad
investment (Allen green , chairman).
• Banks purchased a lot of cheap credit from federal reserve turning
to leverage(borrowing money to amplify the outcome of a deal).
• Wall street made a lot profit and attracted investors.
Home Bank
Investors
owners (mortgages)

19. Down payment
Home owner/Buyer Mortgage broker
Mortgage Lender
Mortgage Housing prises rise practically
• Home owners lend money from lenders and
get a house.
Investment
• Investment banker borrows money and buys banker
lot of mortgages.
• Banks started receiving a lot of money Buys the mortgages from
(instalments) from home owners. lender at a nice profit.

20. Investment Many CDO(Collateralize
banker/bank. mortgages d debt obligations.
• Banks insures these CDO for a fee and “Credit
Safe. 3% default swaps”, is created.
CDO
• Sells Safe to investors.
Okay. 7% • Sells okay to other banks.
Risky. 10% • Sells risky to risk takers of share markets.
• Thus bans make huge money and repays the loan.
Everything was going fine, investors want more mortgages, called
investment banker. Investment banker calls mortgage lender to
find more buyers…. But not much buyers in the market.

21. No down payment,
no proof of income
etc. required
Mortgage Lender More home buyers
• As housing prices always rise, house is the security for their for their
loan.
• Loans were given to less responsible people called “Sub prime
mortgages”.
• Same process repeats, everybody making profit, until homeowners
default on payment of instalments.
• All cash flow to CDO’s turned into houses, which people were not ready
to purchase.
• As neighbourhood houses were foreclosed, and for loaned, property
prices start to fall, responsible people also sold their house and left.

22. Investment NO
banker/bank. Risk takers.
NO
NO
Other banks.
Investors
• Investment bankers borrowed millions of dollars bonds.
• No one was ready to purchase.
• All CDO’s remains with him.
• Other banks and investors faced the same challenge.
• Brokers and lenders are out of the system.
• Whole system collapsed, massive bankruptcy occurred.
• Moreover home owners investment also went worthless.