Low income housing in India

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Transcript of Low income housing in India

  • Deloitte Consulting LLP

    July 2013

    Privately built Low-income Housing in India:

    Opportunity, challenges and potential interventions

  • - 2 -

    Agenda

    Huge demand for low-income housing in India

    Low-income housing is an attractive business opportunity

    Current low-income housing activity in India

    Conducive policy required to scale the industry

  • - 3 -

    Published the first

    data-driven reports

    analyzing BoP-centric

    business models in

    India and Africa

    covering over 700

    inclusive businesses

    Multiple white papers on

    different sectors and articles

    in journals like Harvard

    Business Review

    Regular conference

    addresses across U.S.,

    Europe and Asia; significant

    media coverage in India and

    abroad

    Mobilized a new low-income housing

    market in India over 50,000 units sold

    and mortgage financing provided to

    previously unreached customers

    Developing the market for safe

    drinking water on a pay-per-use basis in

    urban slums

    Foundational work in potential new

    areas for market-building

    Rural sanitation

    Impact sourcing / rural BPOs

    Monitor Inclusive Markets Focus on Market-based

    solutions to improve the lives of low income households

    A recognized thought-leader in the

    global field of MBS

    Working on the ground to mobilize

    markets

    ActionResearch

    Working across India and Africa in Agribusiness, Health, Drinking

    Water, Education, Housing, Financial Services,

  • - 4 -

    MIM has published a number of papers on topics

    pertaining to the bottom of the pyramind

    Emerging Markets,

    Emerging Models

    Is the Bottom of

    the Pyramid

    Really for You?

    Stretching the

    Fabric of

    Microfinance

    Micromortages: A

    Macro Opportunity in

    Low Income Housing

    Finance

    Promise and Progress

    Market-Based

    Solutions to Poverty

    in Africa

    Bridging the Gap: The

    Business Case for

    Financial Capability

    From Blueprint to

    Scale: The Role of

    Philanthropy in

    Impact Investing

    Building Houses,

    Financing Homes

    Investing for Social

    and Environmental

    Impact

  • - 5 -

    1 Monthly Household Income; 2 Affordability defined as households which have EMI / MHI Ratio of 40% of a Home loan which has a 20% down payment

    on an Home value, EMI level of Rs 1,200 per Lac (at 12% interest for a 15 year loan); 3 Conservative estimates that 60% of total households in MHI of

    Rs 520K (36Mn) are renting and looking to buy a house of their own.

    Source: NHB Trends in Housing; CRIS Infac Report; Monitor Research

    Price of unit2 > Rs 25 Lakh

    Potential demand from ~2 M HHs with

    estimated Market Size of ~Rs 500,000 Cr

    Various mortgage finance options

    available for segment

    Building ~22million homes an over Rs. 1,000,000 Cr

    opportunity

    The low-income housing segment (MHI of Rs 7,500 25,000) is estimated at 22 Million

    households with an estimated opportunity size of Rs. 1,100,000 Cr (USD 245 Billion) and is

    largely underserved

    Urban Income Pyramid Offering & Supply of Housing

    Price of unit: Rs 1025 Lakh

    Potential demand from ~5 M HHs with

    estimated Market Size of ~Rs 900,000 Cr

    Mortgage finance available broadly

    1%

    (0.7MM)

    5%

    (3.4MM)

    22%

    (15.0MM)

    33%

    (22.4MM)

    4%

    (2.7MM)

    10,00020,000

    >80,000

    30,00040,000

    Rs 12K in

    the formal sector, limited availability

    below MHI of Rs 12K for formal sector

    and 20K for informal sector

    Potential size of mortgage market

    ~ Rs 8,80,000 Cr

  • - 6 -

    Customer Perspective: Social Need and Willingness to

    Pay

    !"#"$%%&&!&

    "'#

    Laxman is a potential low-income

    house buyer

    (

    (#

    )

    *

    &+

    ,+

    &&%

    (#

    &&

    trapped in poor and insecure

    living conditions.

    Many lower income households live in poor conditions and are dissatisfied with their housing

    situation; but their searches for affordable housing have been unsuccessful

    -

    .

    /%01+02

    ,0/+3

    &&!

    //%"

    /%!"24

    "0!

  • 7 ZGD

    -GE

    N-H

    ousin

    gandW

    ate

    rSlid

    esfo

    rAD

    -2-2

    8-1

    3-D

    A

    Typical Low-Income Group

    Living Conditions

    Low-Income, High-Quality

    Homes

    Affordable Urban Housing

    The Impact: High-quality, Affordable Homes

  • - 8 -

    Agenda

    Huge demand for low-income housing in India

    Low-income housing is an attractive business opportunity

    Current low-income housing activity in India

    Conducive policy required to scale the industry

  • - 9 -

    Sample 1 BHK Unit Layout

    Low income housing requires innovation in design to maximize efficient use of space and

    minimize cost

    KITCHEN

  • 10

    5//!+1

    6.!

    ,

    7

    MIM developed a new business model and got

    companies to leverage it to build low-income homes

    Buy Land

    Incremental Construction

    Sell Units

    Wait for Land Value

    Appreciation

    Traditional Developer

    gg

    Buy Land

    Sell All Units

    Construct Completely

    Low Income Housing Developer

    8./.-

    Helped launch new

    companies

    Helped launch new

    companies

    Santosh

    Associates

    Santosh

    Associates

  • - 11 -

    Vastushodh Projects Pvt. Ltd., Pune

    Site Pictures

    Anandgram

    Yavat

    Source: Company Website, News Prints

  • 12

    70% of low-income customers have informal income but

    need access to loans to buy a house

    High

    Low

    Lo

    an

    siz

    eFormalSemi-formalInformal

    Income type

    Traditional Players

    New opportunity

    Kumar needs a loan to finance

    his low-income home

    but traditional players not

    serving this segment

    -& &

    &59/

    :;

    9

    ,

    59/259/

    !%"

  • 13

    MIM developed a business model and got companies to

    finance informal low-income customers

    !

    "#

    $#

    %&

    ,

  • 14

    Only 2 focused

    private players

    Entry of ~5 additional

    private players

    Entry of new entities and

    established FIs

    Source: Press reports, Company websites, Monitor Analysis

    Year Pre-2008 2011-2012

    Growing realization of untapped opportunity and validation of business model has led to

    entry of a number of established FIs as well as new entities in the low income housing

    finance market

    Overview of the Sector

    Current Growing Interest in Low-Income Housing

    Finance

    2008-2010

  • - 15 -

    Agenda

    Huge demand for low-income housing in India

    Low-income housing is an attractive business opportunity

    Current low-income housing activity in India

    Conducive policy required to scale the industry

  • 16

    Contacts

    2,288

    Qualifying LIH

    Projects*

    96

    Overview of State of the Market study

    Contacts

    Team physically scouted each potential LIH project in the city

    Geographical area in a city included peripheral areas of the city

    Potential areas identified through local HFC network, secondary

    research and resident knowledge

    Qualification Criteria

    # of units: Total number of units in the project greater than 50

    Launch date: project/phase must have been launched after June11

    Price: affordable for a customer earning INR 25,000/month as of Jan

    2012 i.e. not more than INR 10 lakh (ex-taxes & duties) as of Jan 2012

    Only ~4%

    Qualified for

    Survey

    Note: *We did not get complete information for 7 projects (4 from AHD, 3 from MUM). Only 89 have been used for in-depth analysis

    In-depth

    Survey

    Cities

    Quick

    Survey

    Cities

    Qualification criteria used for LIH projects was the same as in the in-

    depth survey

    Contacts were obtained through HFC network, secondary research and

    quick targeted trips to cities of Hyderabad, Bhubaneswar & Pune

    8

    14

    Additional 36

    LIH projects

    from quick

    survey

  • 17

    1116122652281111732945421

    City-wise Breakdown of LIH Supply (June 11 Jan 13)

    Source: Survey conducted by Hansa; Monitor Analysis

    Total supply 30,668

    West India

    GUJ

    Central India

    MP

    East India

    WB, ORR

    North India

    DLI, UP, RAJ

    South India

    TN, AP

    Nu

    mb

    er

    of

    pro

    jects

    West India

    MAH

    # o

    f u

    nit

    s

    285

    6,726

    Ch

    en

    nai

    30

    Hyd

    era

    bad

    200

    Co

    imb

    ato

    re

    998

    Jaip

    ur

    309

    Delh

    i NC

    R

    66

    Meeru

    t

    824

    Lu

    ckn

    ow

    1,752

    Bh

    ub

    an

    esh

    war

    760

    Ko

    lkata

    634B

    ho

    pal

    Ind

    ore

    4,474

    Ch

    an

    dra

    pu

    r

    96

    Ratn

    ag

    iri

    100

    Am

    ravati