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

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/%!"24

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7 ZGD

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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