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ON THE
IN
INDIA
August 2003
CURRENCY EQUIVALENTS
Currency Unit – rupee/s (Re/Rs)
ABBREVIATIONS
ADB – Asian Development Bank
ARDB – Agricultural and Rural Development Bank
AMC – Ahmedabad Municipal Corporation
BME – benefit monitoring and evaluation
CAR – capital adequacy ratio
CFI – community-based finance institution
CBO – community-based organization
FIRE – financial institutions reform and expansion
HDFC – Housing Development Finance Corporation Limited
HFC – housing finance company
HFI – housing finance institution
HUDCO – Housing and Urban Development Corporation Limited
KfW – Kreditanstalt fur Wiederaufbau
MBS – mortgage-backed security
NGO – nongovernment organization
NHB – National Housing Bank
NPA – nonperforming asset
RBI – Reserve Bank of India
SOE – statement of expenditure
TCS – thrift and credit society
USAID – United States Agency for International Development
UK – United Kingdom
NOTES
(i) The fiscal year (FY) of HDFC and HUDCO ends on 31 March, and of NHB, 30 June. FY
before a calendar year denotes the year in which the fiscal year ends, e.g. FY2001 ends
on 31 March 2001 for HDFC and HUDCO, and 30 June 2001 for NHB.
I. BACKGROUND 1
A. History 1
B. Scope of Operations 1
C. Relationship with Asian Development Bank and Other Lenders 2
D. Relevance of Design and Formulation 2
E. Related Technical Assistance 3
II. IMPLEMENTATION 3
A. Lending Policies 3
B. Characteristics of Subloans 3
C. Implementation and Internal Operation of Subprojects 5
D. Operational Performance of the Borrowers 6
E. Borrower’s Financial Performance 7
F. Financial Statements and Ratios 8
G. Covenants 8
H. Performance of the Asian Development Bank 9
III. EVALUATION 9
A. Loan Appraisal 9
B. Implementation 11
APPENDIXES
1. Loan Utilization 15
2. Details of Subloans 19
3. Lending Channels 26
4. Chronology of Main Events in Project Administration 28
5. Projected and Actual Disbursement of Loan Proceeds 31
6. Organizational Structure 32
7. Lending Operations 35
8. Financial Statements of NHB 36
9. Financial Statements of HUDCO 39
10. Financial Statements of HDFC 42
11. Statement of Compliance with Major Loan Covenants 45
(iii)
BASIC DATA
A. Loan Identification
1. Country India
2. Loan Numbers 1549/50/51-IND
3. Loan Title Housing Finance Project
4. Borrowers National Housing Bank (NHB), Housing and Urban
Development Corporation Limited (HUDCO), and
Housing Development Finance Corporation Limited
Ltd. (HDFC)
5. Name of Development NHB, HUDCO, and HDFC
Financial Institutions
6. Amount of Loan $100 million each to NHB, HUDCO, and HDFC,
totaling $300 million
7. Project Completion Report PCR: IND 759
Number
B. Loan Data
1. Appraisal
- Date Started 17 July 1997
- Date Completed 31 July 1997
2. Loan Negotiations
- Date Started 25 August 1997
- Date Completed 28 August 1997
- Actual
- NHB 26 December 2002
- HUDCO 27 December 2002
- HDFC 22 November 2002
7. Closing Date
- In Loan Agreement 30 June 2003
- Revised None
- Number of Extensions None
a. Dates
b. Amount ($ million)
C. Implementation Data
Number of Amount
Component Subloans ($ million)
A. NHB: Lending through:
1. Part A :
a. Government Cooperatives 16 43.56
b. Housing Finance Companies 70 56.44
Subtotal (A) 86 100.00
B. HUDCO: Lending through
1. Part A:
a. Government Cooperatives 67 35.28
b. NGOs/CFIs 23 1.68
c. Corporations and Municipalities 83 56.24
Subtotal (1) 173 93.20
2. Part B:
a. Slum Improvement Projects 21 6.78
b. Workshed-cum-Shelter Projects 1 0.02
Subtotal (2) 22 6.80
Subtotal (B) 195 100.00
C. HDFC: Lending through
1. Part A:
a. Government Cooperatives 3 12.76
b. Companies 5 32.75
c. Corporations and Municipalities 10 16.77
d. Directly to Households 1 37.72
Subtotal (C) 19 100.00
Total 300 300.00
Ratings
Name of Implementation Development Implementation
Institution Period Objectives Progress
NHB Nov 1998–Feb 1999 S S
Mar 1999–Dec 2002 HS HS
HUDCO Nov 1998–Feb 1999 S S
Mar 1999–Dec 2002 HS HS
HDFC Nov 1998–Feb 1999 S S
Mar 1999–Dec 2002 HS HS
S = satisfactory, HS = highly satisfactory
1
ADB. 1995. PCR for the Karnataka Urban Infrastructure Development Project.
2
ADB. 2002. India Mortgage Guarantee Company for $10 million under the private sector window.
2
8. Other external assistance for the housing finance sector comes from Germany, Japan,
Netherlands, United Kingdom (UK), United States, and World Bank. Germany has extended
several lines of credit through Kreditanstalt fur Wiederaufbau (KfW) to HUDCO and HDFC for
low-income housing and rural building centers throughout the country. HDFC has also received
UK funds and assistance from the United States Agency for International Development (USAID)
under its Housing Guarantee Program. NHB borrowed $25 million of an authorized $40 million
from USAID to expand refinancing operations. USAID, under its financial institutions reforms
and expansion (FIRE) program provided HUDCO with $125 million. Japan provided NHB $250
million.
9. International funds constitute 6-7% of the total resource needs of HUDCO and HDFC,
and about 12-15% of NHB’s. The main sources of NHB and HUDCO funds include domestic
bonds/debentures subscribed mainly by local banks/institutional investors, some of which enjoy
fiscal/regulatory incentives. By contrast, HDFC relies significantly on public deposits (45% of
total funding requirements) and domestic borrowings from banks and financial institutions (about
48%).
D. Relevance of Design and Formulation
10. The Government gives priority to expansion of low-income housing as the country has a
housing shortage. The housing sector requires an enabling environment to mobilize investment.
India’s Ninth Five-Year Plan (1997-2002) identified housing and housing finance as a priority. At
the request of the Government, in September 1997 ADB approved the first housing finance
project to help India achieve the long-term objectives of the National Housing Policy. The $300-
million project was approved for implementation through three national HFIs: NHB, HUDCO,
and HDFC.
11. The ADB loan was considered when the Government was introducing policy reforms and
legislative changes that would release land for development and improve the efficiency of
housing markets. The Project was designed to pursue ADB’s human development goals by
undertaking the following:
(i) expand the volume of financial resources available to the sector, especially to
meet the needs of low-income groups,
(ii) catalyze the development and use of new financial instruments and procedures
that will give the poor greater access to credit, and
3
ADB. 2002. India Mortgage Guarantee Company .
4
ADB. 1997. Technical Assistance to India for Strengthening Housing Finance Institutions and Restructuring State
Level Housing Institutions.
5 ADB. 2001. Technical Assistance to India for Assessing the role of Mortgage backed Securities.
3
(iii) support and quicken the pace of policy reform sector-wide, to induce greater
efficiencies.
The Project was conceived to ensure participation of formal agents in housing finance, informal
agents such as nongovernment organizations (NGOs) and CFIs, besides involvement of the
government and beneficiaries. The Project sought to integrate the formal and informal housing
finance mechanisms, channel funds to low-income households (LIH) and strengthen the
housing finance sector and widen its outreach under three components: (i) lending through
CFIs, HFIs, companies, and households (part A), (ii) lending for slum improvement and low-
income housing projects (part B), and (iii) equity to new and existing HFCs (part C).
E. Related Technical Assistance
12. The Project does not have an attached TA. However, ADB has approved, concurrently
with this Project, two advisory TAs and one small-scale TA (para. 7).
II. IMPLEMENTATION
A. Lending Policies
13. NHB’s lending policies have evolved over the years in response to the transformation of
the Indian financial sector from a regulated to a more market-oriented one. Commercial banks
have been increasing their housing finance portfolio recently, and the institutional infrastructure
for it has been expanding significantly. Market forces and falling interest rates have compelled
NHB to be more nimble in responding to market indicators and altering its terms of refinance.
The agency has introduced MBS issues, a market-oriented intervention to raise funds.
HUDCO’s housing and urban infrastructure assistance mainly support government-sponsored
and -guaranteed programs, but the agency has recently opened a direct lending window for
retail clients. HDFC’s corporate objective is to provide market-based loans for home ownership.
The agency continues to be commercially oriented, adopting a customer-centered approach and
improving operational efficiency and use of technology.
B. Characteristics of Subloans
14. The Project was designed with three broad components:
(i) Part A: Lending through CFIs, HFIs, companies, and households. This
component provides for finance through: (a) government-supported CFIs such as
cooperative housing societies and cooperative rural development banks and
HFIs, (b) nongovernment CFIs such as thrift and savings societies organized
voluntarily, and (c) direct lending to households or large private companies for
workers’ housing needs.
(ii) Part B: Lending for slum improvement and LIH projects. Designed to have
participation of the benefiting community, local authorities, private sector, and
borrowers, this part comprises three types of subprojects: slum networking,
workshed-cum-shelter, and enhanced productivity-cum-shelter for LIH to
establish homebased business or income generating activities.
(iii) Part C: Equity to new and existing HFCs. This component was intended to
expand the housing finance system. ADB did not allocate funds for this purpose,
but NHB, using its own funds, was to help refinance at least eight HFCs.
15. The project funds were fully utilized by the three borrowers to lend through multiple
channels (Appendixes 1-3). Under part A, the three borrowers together lent $293 million through
various channels: (i) cooperative societies ($91 million), (ii) state governments, municipal bodies
and local authorities ($73 million), (iii) privately or publicly owned corporations ($33 million), (iv)
4
nongovernment CFIs, thrift societies or groups ($2 million), (v) HFCs ($56 million), and (vi)
directly to individuals ($38 million). Against the target of 50%, 62% of project funds were lent to
low-income groups. The Project assisted a variety of initiatives to enable beneficiaries to own
their homes. Loans through cooperative housing societies helped individuals build their own
houses and were generally demand induced. Loans through housing boards, slum improvement
boards, and municipal/local authorities were supply driven, with the subborrower usually
implementing government-sponsored schemes to build shelter for subsequent allotment and, on
occasions, to relocate a slum. Loans to private corporations were to create housing stocks to
house subborrowers’ employees. One of the subloans was to rehabilitate people affected by a
large dam.
16. The target under part A has been exceeded by $33 million, with a corresponding
underachievement under part B. Under part A, lending to cooperatives was more than
estimated, by $16 million, and that to companies, municipalities, HFCs and households, by $35
million. Lending through CFIs/NGOs, however, has been short of expectations by $18 million,
with the entire assistance channeled through HUDCO, since HDFC preferred to use cheaper
KfW sources and internal accruals.
17. Under part B, $6.8 million was channeled to slum improvement and workshed-cum-
housing schemes against the target of $40 million. Slum improvement has traditionally been
funded with state resources or with institutional funds channeled through state agencies and
guaranteed by state governments. The Project aimed to use a new approach—a participative
process among the various stakeholders—to upgrade slums. However, HUDCO routed the
entire assistance under the component through traditional channels, while HDFC did not on-
lend any funds for such schemes. The subprojects typically involved construction of alternate
dwelling units for squatters, and basic infrastructure such as water, drainage, sanitation, etc. As
the Project was implemented, it became clear that more promotional efforts are required before
we can realize the potential benefits of participative process. Effective and bankable slum
networking subprojects that could have been assisted were lacking. Even the oft-cited
Ahmedabad slum networking project did not produce the originally envisaged outcome, with the
community’s contribution not as estimated. Even this limited contribution from the community
was met without recourse to loans from mainstream financial institutions such as HUDCO,
HDFC, etc.6
18. Under part C, NHB has, on its own, been expanding the institutional sources of housing
finance through selective equity support and refinance to HFCs. The number of NHB-approved
HFCs increased to 31 from 25 when ADB approved the Project. The HFCs together disbursed
an estimated Rs150 billion during FY2002 (Rs.46 billion during FY1997). NHB’s initiatives in
setting up the first mortgage guarantee company and supporting MBS issues are other efforts to
expand and strengthen the housing finance system.
19. Subprojects assisted were to meet the cost of 219,449 units against estimates of
360,000 in the report and recommendations of the President (Appendix 2). Although the
absolute numbers fall short of estimates, the share of low-income groups (87%) exceeded
expectations (75%). Considering the close linkage between asset ownership and eventual
improvement of human welfare, the loan helped improve LIHs. The Project was expected to
result in leverage of investment up to four times. Based on project costs as estimated by the
borrowers, the leverage varied from 1.3 to over 2.3.7 However, these do not include expenses
for land and substantial additional investments by beneficiaries to improve facilities, which were
6
ADB. 1999. Technical Assistance to India for Strengthening Microfinance Institutions for Urban Infrastructure
Finance.
7
ADB reimbursed 100% of the loans given by the borrowers. Had ADB restricted the refinance level, the Project
would have delivered even higher leverage.
5
funded by personal savings and informal credit. Reckoning these additional investments and
expansion in credit facilitated by the increased number of NHB-approved HFCs and
development of MBS, effective leverage would be much higher.
20. Five states (Tamil Nadu, Kerala, Maharashtra, Gujarat, and Andhra Pradesh) accounted
for over 85% of loans (excluding those coursed through the HFCs and a small part of the retail
portfolio for which data were not readily available) (Appendix 1, Table A1.3). This pattern mirrors
loan distribution by HUDCO and indicates proactive state sponsorship of, and support to,
housing programs. Even HDFC reflects this pattern although the agency’s retail portfolio is
heavily concentrated in Maharashtra. The Project encouraged lending to reform-oriented states,
which may partly explain this phenomenon.
21. Recovery rates of subloans varied based on the delivery channel and character of the
subproject. For about one third of the loan amounts channeled by HDFC or NHB through HFCs
directly to individuals and corporations, recovery rates from the ultimate beneficiaries were very
good.8 The Project also included a third of the funds lent through cooperatives, with an
implied/overt government guarantee to the borrowers. The review missions9 noted that recovery
was unsatisfactory, varying from 5% to 80%, depending on states’ forbearance and prevalence
of alternative subsidized state programs that discouraged timely debt servicing. About 28% of
the funds were lent for schemes initiated by the state governments, local or municipal
authorities, where repayment to the borrowers had an implied government guarantee. The
schemes were for a variety of purposes. Loans to the state government were usually for house
building advances for staff, who usually repaid from their salaries. Other schemes were dwelling
units built by state or local bodies, which were sold under outright purchase or hire purchase or
lease schemes. Recovery performance under these schemes is inconclusive due to insufficient
data.
C. Implementation and Internal Operation of Subprojects
22. The loans were quickly disbursed to all the borrowers within the first 3 years of
implementation (Appendix 5). The borrowers adopted the imprest account procedure and
submitted all claims under the statement of expenditure (SOE) procedure for liquidation and
replenishment. Subsequent SOE and project review missions, however, found that the
borrowers did not adequately follow ADB implementation guidelines. A number of claims were
ineligible mainly due to inclusion of subloans disbursed before the date of effectiveness, and
sometimes due to inadequate supporting documents. The borrowers, who were implementing
an ADB project for the first time, were not familiar with ADB procedures and documentary
requirements. Funds reach the ultimate beneficiaries through a number of intermediaries, on
whom the borrowers normally rely to keep records of loans. The borrowers’/subborrowers’
record-keeping system did not always separately identify ADB-funded subprojects. State
government guarantees on subloans resulted in slack record keeping and information feedback.
In case of direct loans to the ultimate beneficiaries or to NGOs/nongovernment CFIs, however,
due diligence during the entire approval and monitoring process was satisfactory and in line with
internal procedures. Based on the subsequent feedback from the borrowers, ADB approved
substitutions of ineligible subloans with eligible ones.
23. Direct loans to individuals and HFCs are generated from the demand side and, hence,
generally completed. HUDCO has reported that about 86% of the planned dwelling units are
completed, as substantiated by sample reviews of cooperative housing finance schemes by
8
HDFC’s nonperforming loans (NPLs) has been consistently very low at about 1%. Assisted by NHB, HFCs also
had good recovery rates, with NPL below 3%.
9
ADB review missions were fielded on 12-22 October 1998, 1 December 1999-23 February 2000, 6-17 March
2000, 24 July-10 August 2000, 26 February-10 March 2001, 23-25 May 2001, etc.
6
ADB missions, random audit missions, and staff consultants. Subloans for slum
improvement/housing schemes by slum improvement/housing boards/other authorities are
generated from the supply side. Sometimes these schemes are hampered by resistance from
slum dwellers. Implementation of such government-sponsored schemes also suffered from poor
financial state of the agencies and absence of accountability. Of the 3,604 dwelling units
planned under the slum improvement schemes, 1,741 were completed and 1,419 are in
progress. Sometimes the houses were not allotted due to poor demand. Overall, many assisted
projects have been successfully implemented. All the dwelling units are subject to local
regulations and development rules. Lenders such as HDFC and other HFCs generally ensure
conformity to such regulations before disbursements.
D. Operational Performance of the Borrowers
1. Organization, Management, and Staffing
24. NHB is managed by a board of directors comprising nominees from RBI; central
Government (ministries of finance, urban development and poverty alleviation, and rural
development); and state governments; and other professionals from finance, architecture, and
housing sectors. NHB’s staff strength, including professionals equals 80 (Appendix 6, Table
A6.1). HUDCO is managed by a board of government nominees and government-appointed
professionals (Appendix 6, Table A6.2). With a staff of 1,142, including 627 executives, HUDCO
has its corporate office in Delhi with 33 other offices. HDFC is a joint stock company listed in the
stock exchanges and managed by a team of professionals under the supervision of a board of
directors. The agency has a network of 118 offices and 1,029 employees, including
professionals such as engineers, architects, lawyers, and financial specialists (Appendix 6,
Table A6.3).
2. Personnel Administration
25. NHB staff include professionals from diverse disciplines such as economics, finance,
law, civil engineering, urban/town planning, architecture, business administration, chartered
accountancy, banking, computers, and information technology. NHB conducts human resource
development programs regularly to upgrade staff skills to meet market needs. HUDCO develops
human resources through regular training programs. During FY2002, 470 employees were
nominated for staff development programs in India and abroad. HDFC, a professionally well-
managed organization with a pool of committed, qualified staff from various disciplines, offers
market-related compensation for its staff. HDFC revises its human resource development
policies and compensation package periodically to meet market needs and staff aspirations.
3. Lending Operations
26. NHB regulates, promotes, and financially helps the housing finance industry. NHB’s
lending programs include refinance of individual housing loans (in urban and rural areas,
through HFIs and HFCs), project loans, rental housing schemes, slum upgrading, and off-
site/on-site infrastructure development. NHB routes its financial assistance through a wide
range of intermediary retail institutions such as HFCs, scheduled banks, cooperative banks,
regional rural banks, agriculture and rural development banks, apex cooperative housing
finance societies, and CFIs. Thirty-one HFCs, with a network of more than 650 branches across
the country and accounting for over 95% of HFCs’ market share, are approved for refinance by
NHB. In its appraisal of HFCs, NHB includes assessment of their conformity to financial
parameters, prudential guidelines, track record of repayments,10 etc. As of FY2002 NHB’s
cumulative refinance to HFCs, commercial banks, and cooperative finance institutions
10
Maintenance of a minimum CAR of 12%, liquid assets at least at 10%, minimum net owned funds of Rs100
million, and maximum net NPL of 5% are some of the parameters.
7
amounted to Rs72.51 billion, with most (76%) going to HFCs (Appendix 7). Although limited in
quantum (Rs1.97 billion as of FY2002), NHB directly finances land development and shelter,
housing infrastructure, and slum redevelopment projects. NHB’s support for mortgage
securitization has helped float five MBS issues, so far mobilizing Rs3.60 billion.
27. HUDCO’s cumulative approvals and disbursements up to FY2002 aggregated Rs420.12
billion and Rs293.34 billion, respectively, covering 13.12 million dwelling units, over 4.88 million
sanitation units, and 1,915 infrastructure schemes (Appendix 7). HUDCO’s outstanding portfolio
consists predominantly of government-guaranteed loans to government departments/agencies
(92%), with the balance to private sponsors/individuals. HUDCO assistance is for urban/rural
housing, staff quarters, repairs/renewals, night shelters, private builders’ projects, NGO/CBO
schemes, and retail mortgages. Urban infrastructure finance is for land acquisition and
development, sanitation, slum improvement, utility infrastructure, social infrastructure, and
economic and commercial infrastructure.
28. Most of HDFC’s operations consist of retail mortgages. The agency has devised a
variety of loan structures to suit varying needs. HDFC also lends to corporations for their
employees’ housing credit needs although this is not a significant part of its portfolio. HDFC’s
cumulative approvals and disbursements by FY2002 reached Rs401.36 billion and Rs335.70
billion, respectively (Appendix 7). Though limited in quantum, HDFC also lends through
CFIs/NGOs. HDFC has developed transparent procedures for loan processing, with emphasis
on assessing creditworthiness and repaying capacity. Before disbursement, HDFC ensures
conformity to local development regulations and rules.
4. Other Operations
29. Other NHB operations include: (i) regulating and supervising about 350 HFCs – it issues
prudential norms relating to income recognition, asset classification, capital adequacy, asset
liability management, etc., and (ii) promoting and developing the housing sector by guiding
investment to it by interacting closely with the Government to articulate and influence policy.
NHB’s promotional initiatives include TA to sector participants, development of the MBS market,
etc. HUDCO’s developmental role comprises support for technology dissemination in housing
construction; research and training in capacity building for agencies; consultancy services for
housing, urban development and infrastructure, and so on. HUDCO’s Human Settlement
Management Institute provides training, research, and consultancy. Besides focused credit
delivery in housing finance, HDFC has undertaken a number of finance initiatives through its
associate companies in infrastructure finance, credit rating, credit information services,
consumer finance, commercial banking, property management, asset management, trusteeship
services, and insurance.
E. Borrower’s Financial Performance
30. NHB, being primarily a refinance institution, has a small loan book. NHB’s
disbursements increased from Rs5.3 billion in FY1998 to Rs11 billion in FY2002. Significantly,
the pace of growth in NHB’s operations has slackened from an annual growth of 45.3% in
FY1999 to 5.4% in FY2002, reflecting the decline of refinance as a support mechanism in an
increasingly market-oriented industry. HDFC registered consistent growth in loan approvals and
disbursals. With an annual average growth of 29.3% over the last 5 years, HDFC’s approvals
increased from Rs32.5 billion in FY1998 to Rs90.4 billion in FY2002, resulting in growth of
outstanding portfolio to Rs171.7 billion by FY2002. HUDCO’s operations, which registered
consistent growth in loan approvals up to FY2000, fell significantly in FY2001 but recovered
somewhat during FY2002 with an approval of Rs81 billion. This trend is also reflected in
HUDCO’s disbursements, which grew only very modestly over the last three years. HUDCO’s
loan book composition has changed recently, with the share of housing falling from 60% to 39%,
8
and the share of urban infrastructure increasing. While HDFC has consistently had a high
proportion of disbursement to approval (around 84% over the last five years), this ratio has been
low for HUDCO and has fluctuated considerably year by year.
F. Financial Statements and Ratios
31. NHB’s assets steadily increased in FY1998–2001, indicating the industry’s growth and
demand for refinance (Appendix 8), but growth slowed down in FY2002. In recent years, interest
rates have become increasingly market determined, and institutional infrastructure has been
expanding, unleashing competitive forces. In response, HFIs and banks resort to refinance only
at the margin. Development of the MBS market has also reduced the importance of NHB’s role
as a provider of finance. NHB’s borrowings have not exhibited any significant trend, although
reliance on RBI support has been reduced, and that on multilateral sources and priority sector
bonds has increased. NHB’s reserves have grown steadily with regular plough back of profits,
which were consistent in FY1998–2001 but declined in FY2002, primarily due to withdrawal of
NHB’s tax-exempt status. The return on average equity and average assets went up until
FY2001 but declined in FY2002. NHB’s CAR of 20.2% for FY2002 was well above the
regulatory minimum. NHB is regulated by RBI and follows its guidelines for provisioning and
write off. NHB’s debt-equity ratio was 4.5, and NPL ratio 0 for FY2002. NHB’s asset liability
management is in accordance with RBI norms and reflects adequate liquidity in short-term
buckets.
32. HUDCO’s assets grew steadily in FY1999–2002, although more slowly than in recent
years (Appendix 9). Growth has been funded by equity infusion from the Government and
increased issue of bonds, which have been enjoying good credit rating due to implied
government support. Recently, however, bonds have been downgraded due to the strained
financial position of some of the state governments to which HUDCO is exposed. During
FY1998–2002 HUDCO’s reserves also grew, although if arrears in provisioning were reckoned,
growth would be lower. HUDCO’s profits increased during FY1998–2001 but declined in
FY2002. With the backlog in loan loss provisions, the adjusted bottom line would reflect losses.
HUDCO’s financial ratios reflect declining performance since FY2001. HUDCO’s CAR at 9.49%
for FY2002 is below the regulatory minimum of 12%. Although governed by prudential norms
laid down by NHB, HUDCO has not made adequate loan loss provisions. The statutory auditors
and ADB review missions have observed that HUDCO does not receive confirmation of
outstanding balances from most of its borrowers. The missions have also observed that
HUDCO lends against government guarantees. HUDCO’s performance has been affected by
delays/defaults in payment by some state agencies. Going by the inadequate provisioning
disclosed in financial statements, HUDCO’s recovery performance has not been satisfactory.
33. HDFC’s assets have grown robustly at an average annual rate of 21.66%, reflecting the
growth in the mortgage loan market (Appendix 10). Notwithstanding the pressures of
competition, HDFC’s profits have increased continuously, resulting in accretion to its reserves,
which have grown at an average annual rate of 11.4%. Return on equity recorded continuous
increases while maintaining a constant return on average assets. HDFC follows the regulatory
norms laid down by NHB for provisioning and write off. HDFC’s recovery has been consistently
healthy, with an NPL ratio of about 1%. The debt-equity ratio, which increased from 5.00 in
FY1999 to 6.69 in FY2002, was within healthy limits. HDFC’s book value and earnings per
share have been consistently healthy. CAR has been above the minimum required 12.0%
(14.5% in FY2002).
G. Covenants
34. All the three Borrowers have generally complied with most loan covenants (Appendix
11). Some of the measures under institutional action plans were not fully complied. In particular,
9
these agencies did not take effective and sufficient steps to improve cooperative financial
institutions. HUDCO and NHB did not submit audited statements to evidence compliance with
some of the financial ratios. HUDCO has not complied with the required debt service coverage
ratio for some of the years. None of the borrowers submitted benefit monitoring and evaluation
reports or maintained separate records on bulk loans through intermediaries funded out of ADB.
While the borrowers provided ADB with certified copies of the audited accounts and financial
statements, auditors’ reports relating to loan utilization and compliance with covenants were
irregular and provided only after reminders from ADB officials.
H. Performance of the Asian Development Bank
35. The Project was the first ADB intervention in the Indian housing finance sector. The
Project’s efficient administration was somewhat affected by the steep learning curve with
respect to institutional delivery system, intermediaries’ procedures and practices and ADB loan
requirements. ADB allowed flexibility in reaching targeted beneficiaries through alternate
delivery channels. Initial review missions were restricted due to administration in headquarters
but were facilitated once the loan was delegated to the India Resident Mission. The audit by the
ADB team showed how a few subloans were ineligible. Dispensing with prior ADB subloan
review proved counterproductive as resources later had to be deployed to replace ineligible
subloans. Closer ADB involvement before full disbursement would have allowed better
utilization of assistance to targeted beneficiaries and improved recording of program benefits.
ADB, however, enhanced its subsequent due diligence with more field and SOE reviews.
III. EVALUATION
A. Loan Appraisal
1. Distribution of Subloans
36. Under part A of the Project, actual funds deployed and the number of beneficiaries
broadly met project estimate. The targeted share of funds deployed for low-income housing
was exceeded by a wide margin, and the share of low-income beneficiaries was higher than
project estimates. Under the various subcomponents, the Borrowers’ performance met project
expectations, except in case of CFI/NGO lending channel estimates. Various ground-level
realities pose problems for lending to the CFI/NGO sector, which the ADB Review Mission
listed: (i) lack of adequate collateral, (ii) CFIs’/NGOs’ lack of knowledge of financial operations,
(iii) rigid appraisal systems with emphasis on security rather than the servicing capacity of the
borrower, and (iv) lack of imagination in devising flexible but commercially viable loan
structures. NGOs/CFIs are also seen as being high-risk borrowers because of the discontinuous
and uncertain income streams of the ultimate beneficiaries.
37. Under part B, slum improvement and low income housing projects projects were to be
carried out under three kinds: (i) slum networking, (ii) workshed-cum-shelter, and (iii) enhanced
productivity-cum-shelter. Innovation in slum networking subprojects were also expected to
rectify drawbacks of the traditional approach, which did not involve beneficiary consultation in
planning and implementation, and suffered from lack of ownership, since the assistance was
considered free and the beneficiary not assured tenure. The assumption that the Project would
be able to reach the poor through slum networking proved unrealistic. Even HUDCO, which is
mandated to take up programs to meet the housing needs of low-income groups and
economically weak sectors, could not meet project estimates. For the commercially oriented
HDFC, slum networking and assistance through NGOs/CFIs posed too many risks. NHB’s
scheme for lending to CFIs/NGOs through HFCs, although conceived long ago, has not elicited
any response from them, which, like HDFC, lend on commercial principles.
10
38. Another possible reason behind underachievement in this area is the prevalence of
several government housing schemes for the poor funded by budgetary provisions. ADB’s
experience under another project,11 which experimented with pilot projects to upgrade slums
through a similar participative process, indicates that slum communities and even CFIs are
unwilling to borrow to develop community infrastructure but that demand for loans for individual
connections rises once the infrastructure is in place. This Project also confirmed review mission
findings that collateral requirements, bureaucratic procedures, absence of land tenure, etc. are
the stumbling blocks to procuring institutional funds to upgrade slums. Despite the inefficiency of
government-sponsored rural housing schemes, their very availability discourages the demand
for credit-linked schemes. HUDCO, however, has lent for slum improvement projects and low-
income housing through loans to slum development boards. Although it did not use the ADB
loan to lend to CFIs/NGOs, HDFC has been lending to them under its KfW line of credit, which
carry lower rates of interest than ADB’s loan. Under three KfW lines of credit, HDFC financed
over 90,000 dwelling units with loans totaling Rs1 billion until FY2002. HDFC finds that high cost
of ADB funds and lack of adequate collateral restrict lending to slum improvement projects.
39. The borrowers have attempted to improve housing delivery, expand housing finance
system, and increase the availability of housing finance by leveraging public and private sector
capital. Since 1997 NHB registered six more HFCs as eligible for refinance. NHB’s equity
investment in HFCs aggregated Rs151 million by FY2000. Housing finance growth is reflected
in NHB’s refinance assistance and MBS floated in recent years. NHB has issued a number of
MBS and also promoted a mortgage credit guarantee company for which ADB has approved
equity assistance. All the borrowers have reached out to low-income groups.
40. Since 1997 the Government has initiated many legislative and policy reform measures,
which are expected to encourage private sector investment in housing. The repeal of the Urban
Land Ceiling Act, amendment of the Rent Control Act, and amendment of the NHB Act to
facilitate foreclosure on defaulting loans and to lower stamp duties in some states are examples
of such measures, although regulatory/legal reforms at the provincial level need further action.
Training and outreach programs by HUDCO and NHB to build capacity in the cooperative
housing sector and HFIs have not been sufficient in significantly improving their performance.
2. Covenants
41. While the borrowers complied with most covenants, some of the project expectations
were not reflected in the loan agreements, thus limiting ownership of achieving such
expectations. The Project would have achieved higher leverage with a covenant stipulating
higher share of borrowers in the project cost. ADB should conduct an outreach program to
explain to the borrowers, ADB’s benefit monitoring and evaluation requirements.
3. Quality of Appraisal
42. NHB and HDFC follow stringent appraisal methods and on-lend only after ascertaining
the beneficiaries’ creditworthiness. NHB has listed eligibility criteria and prudential norms that
HFCs must fulfill if they want refinance (footnote 10). HDFC also strictly ascertains beneficiaries’
eligibility. HUDCO has a standard and well-established set of guidelines for loan appraisal.
While these procedures are followed for technical evaluation, ADB review missions have
observed that certain other guidelines are sometimes not observed. To meet government
targets for providing housing to the poor, HUDCO has relied on implied/overt guarantee of state
governments without strict financial appraisal. Although HUDCO had a system of internally
rating the intermediary institutions, the rating often did not reflect the current financial position of
11
ADB. 1999. Technical Assistance to India for Strengthening Microfinance Institutions for Urban Infrastructure
Finance.
11
the institutions due to backlog in finalization of accounts, and audit. Appraisal and monitoring
procedures of loans through NGOs/nongovernment CFIs were based on professional
assessment of the borrowing organization’s capacity and implementation progress, perhaps
because they were not supply driven or supported by government guarantee.
43. ADB adequately assessed the economic situation and housing finance sector. ADB’s
assessment of the roles of DFIs and their ability to channel project funds was generally
satisfactory. However, monitoring procedures of executing agencies, particularly HUDCO,
should be assessed more in-depth.
B. Implementation
44. ADB disbursed the loan amount quickly, within the first three years of implementation
under the imprest account procedure and SOE procedure for liquidation and replenishment. To
hedge the foreign exchange risks of ADB funds, all three borrowers entered into specific
transactions with financial sector participants such as commercial banks and the Export-Import
Bank of India. These transactions involved deposit of foreign currency funds under the Project
with the counterparts against rupee loans/ subscription to rupee bonds by these counterparts at
market-determined rates of interest. Debt servicing under such bilateral deals coincided exactly
with interest payment dues and amortization schedules under the ADB loan.
45. The SOE threshold, which was too high for a typical housing loan, deterred a closer
review in the early stages, leading to quick approval of most loans without the required
screening. The SOE format should be modified to capture information for a better review of
subloans and their benefits. ADB’s procedures and objectives should be known early on in a
project, and project quality improved at entry to avoid problems of the kind experienced when
ineligible subloans had to be substituted with eligible ones. The subborrowers were sometimes
found to be late in on-lending to the ultimate beneficiaries. Although most of the projects were
implemented, a more intensive screening early on could have prevented the interruptions to
smooth project implementation.
IV. ASSESSMENT AND RECOMMENDATIONS
A. Relevance
46. Expansion of mortgage credit and institutional infrastructure for housing finance
continues to be a priority. The Project, designed to channel ADB resources through the three
national institutions, was appropriate for extending resources to low-income housing. The
Housing Finance II Project, which was approved subsequently to purvey credit to low-income
housing, is now under implementation, thus confirming the relevance of the Project. The
experience points to the need to channel funds through a demand-induced mechanism rather
than support supply-driven or government-sponsored measures, which do not encourage cost
recovery.
47. The Project is relevant to the Government’s objective to improve slums. However,
integration of CFIs/NGOs into mainstream financial institutions has not been successful. While
NGOs/CFIs can motivate beneficiary participation, a number of changes have to precede
mainstreaming of CFI/NGO efforts: (i) simplifying lending procedures, (ii) relaxing collateral
requirements, (iii) building capacity of CFIs/NGOs and major HFIs, and (iv) ensuring land
tenure. While able to articulate the need of the poor for housing finance, NGOs/CFIs have not
made financial proposals sufficiently bankable. Besides, government subsidized/free schemes
12
deter a commercial approach to mortgage credit. CFIs/NGOs, therefore, cannot yet take the
place of government agencies in slum improvement and low-cost housing.12
12
ADB. 1999. TA 3344-IND, which include pilot projects based on slum-networking design supports this
conclusion.
13
exposure to states that can provide guarantees. While these initiatives appear to be a response
to the environment, HUDCO’s financial operations have been affected by the agency’s bias for
government-sponsored schemes, which are not sustainable in the long run due to poor cost
recovery.
53. HDFC has operated commercially and adopted a professional approach to appraisal and
monitoring of credit proposals. Programs channeling funds through HDFC, with its
predominantly retail portfolio and excellent recovery ratio, are sustainable.
54. Programs with clear cost recovery mechanisms are sustainable. Wherever equity
considerations compel policymakers choose subsidy, they should adopt a professional
approach to cost recovery, with a transparent mechanism to channel subsidies. The Project is
sustainable.
E. Other Impacts
55. Under its loans to private enterprises, HDFC funded subprojects to build quarters for
low-income employees, which improved their and their families’ living, social, and cultural
conditions—a state that will continue even after the employees retire. After these employees
leave the company, their dwelling units will be allotted to new employees, who will also similarly
benefit.
F. Overall Assessment
56. The Project’s main objective was to provide shelter to about 360,000 households, by
expanding and strengthening the delivery mechanism, improving linkages between CFIs/NGOs
and HFIs, drawing up enabling policy reform, and ameliorating slum conditions through
innovative projects for slum improvement and low-income housing. By providing public and
private borrowers with diverse delivery channels and approaches to lending, the Project
explored various methods to achieve the objective. The Project met its objectives although its
sustainability was limited by the subborrowers’ inadequacies in professional financial
management and accountability, and by the adverse demonstration effect that state-sponsored
schemes had in cost recovery. Sector policy reform has been substantially achieved with the
repeal of the Urban Land Ceiling Act, amendment of the Rent Control Act, and amendment of
the NHB Act to facilitate foreclosure on defaulting loans, although more state regulatory/legal
reforms are needed. The Project achieved limited success in expanding the cooperative finance
system with insufficient proactive efforts to expand assistance to hitherto less-served states.
The Project was unsuccessful in establishing linkages between CFI/NGO and HFIs. Overall the
Project was successful.
G. Lessons Learned
57. Formal agencies hesitate to lend to CFIs/NGOs, which are seen as high-risk borrowers
due to the discontinuous and uncertain income streams of the ultimate beneficiaries, lack of
security, incapacity of the intermediary, etc. The perceived risk compelled HFIs to be selective
in lending through this window. HDFC for instance, has reported 100% recovery in assistance to
CFIs/NGOs, but not out of the project funds, suggesting that to meet the large gap in housing
for the poor, specialized HFIs with a social mandate, such as HUDCO, are still relevant.
However, to sustain such institutions, a transparent mechanism is needed to meet the social
costs of such intermediation, and processes and procedures of field-level institutions such as
the cooperative societies need to be changed fundamentally. Linkages between CFIs/NGOs
and HFIs for slum networking can be realized only after some of the macro issues relating to
state policies on land title, cost recovery, transparency of subsidies, improved governance, and
reform of state agencies’ financial management are solved. Other important lessons include the
following: (i) a different set of guidelines must be adopted to assess and mitigate risks under
14
CFI/NGO, (ii) high intermediation costs should be recognized, and (iii) intermediaries’ capacity
must be upgraded. To maximize the chances of project success, particularly in policy reform
and institutional development, the borrowers’ roles need to be clearly laid out and agreed upon
formally. To facilitate monitoring and timely response, executing agencies must understand
early on ADB’s procedures and feedback requirements. The usually stipulated free and SOE
limits are often irrelevant in these kinds of projects where the subloans constitute individual
mortgage loans, which are too small ($1,000–10,000) to be above the limits. A format should be
devised to capture data during disbursement to better monitor subprojects and facilitate
subsequent reviews on a random basis.
58. The Project would have achieved a higher leverage had the borrowers shouldered a
higher share of the project cost. The prevalence of subsidized government-sponsored schemes
discourages cost recovery even from those willing and able to repay. Field reviews of some low-
income group schemes revealed many instances of higher investment than estimated by the
borrowers, funded by informal sources such as savings, moneylenders, etc. While many such
beneficiaries regularly serviced such informal loans, often at usurious rates of interest,
repayments to government intermediaries were irregular.
H. Recommendations
59. The Government’s policy of increased private sector participation and limiting the
Government’s role to creating a conducive environment is appropriate and worthy of continued
support. The commercially oriented institutional structure consisting of HFCs and commercial
banks provides channels of purveying credit to middle- and high-income borrowers, and
perhaps even to some at the upper end of the low-income category. The cooperative system
should be restructured and profefsssionalized to improve financial management, record
maintenance, and accountability since the system can better reach rural areas, economically
weak sectors, and the poor than HFCs and commercial banks. Subsidy may be necessary for
the poorer sections, and should be transmitted in a transparent manner through all institutional
channels to promote competition and encourage alternate methods of leveraging the subsidy for
larger benefit.
60. Resources should be allocated for continuous monitoring of ADB lending program
benefits, and mechanisms established to identify the roles of various project stakeholders. To
achieve institutional/policy objectives, borrowers’ roles should be clearly laid out and agreed
upon formally. Future projects must ensure that the executing agencies comprehend well and
early on ADB’s procedures and feedback requirements. The threshold limits for free and SOE
limits and documentation requirements should be relevant to the Project and should be
restructured to meet ADB’s feedback needs.
LOAN UTILIZATION
Table A1.1: Estimates and Achievements
($ million)
Appendix 1
System To be carried out by NHB from its own resouces
CFI = Community-Based Finance Institutions, HDFC = Housing Development Finance Corporation Ltd., HUDCO = Housing and Urban Development Corporation Ltd.
15
16
Appendix 1
LOAN UTILIZATION
Table A1.2: Share of LIG in Total Assistance
Assistance for LIG Units Assistance for Non-LIG Units Total Assistance Share of LIG Units
Number of
DFI Number Amount Number Amount Number Amount DUs Funds
(Rs million) ($ million) (Rs million) ($ million) (Rs million) ($ million) % %
NHB 31,307 2,291.48 53.8 15,358 1,969.0 46.2 46,665 4,260.5 100.0 67.1 53.8
HUDCO 134,927 3,123.02 73.9 5,835 1,103.6 26.1 140,762 4,226.6 100.0 95.9 73.9
HDFC 25,466 2,489.59 58.5 6,556 1,764.3 41.5 32,022 4,253.9 100.0 79.5 58.5
Total 191,700 7,904.09 186.2 27,749 4,836.9 113.8 219,449 12,741.0 300.0 87.4 62.0
DU = dwelling units, DFI = development finance institutions, HDFC = Housing Development Finance Corporation Limited, HUDCO = Housing and Urban Development Corporation Limited,
LIG = lower income group, NHB = National Housing Bank.
Source: Borrowers' reports.
Appendix 1 17
LOAN UTILIZATION
Table A1.3: Disbursement of Loans by NHB, HUDCO and HDFC by State
State NHB HUDCO HDFC Total NHB HUDCO HDFC Total Share
(Rs million) ($ million) (%)
Andaman & Nicobar 6.30 6.30 0.15 0.15 0.06
Andhra Pradesh 626.58 294.40 920.98 14.82 6.92 21.75 9.19
Assam 70.08 70.08 1.66 0.00 1.66 0.70
Bihar 50.56 50.56 1.20 0.00 1.20 0.50
Gujarat 642.54 329.08 971.62 15.20 7.74 22.94 9.70
Haryana 95.75 95.75 2.27 0.00 2.27 0.96
Himachal Pradesh 7.23 7.23 0.17 0.00 0.17 0.07
Jammu & Kashmir 13.31 13.31 0.32 0.00 0.32 0.13
Karnataka 58.89 52.72 338.70 450.31 1.38 1.25 7.96 10.59 4.49
Kerala 1,037.55 1,401.51 47.50 2,486.56 24.35 33.16 1.12 58.63 24.82
Madhya Pradesh 74.75 246.20 320.95 0.00 1.77 5.79 7.56 3.20
Maharashtra 170.62 927.14 1,097.76 0.00 4.04 21.79 25.83 10.96
Manipur 0.74 0.74 0.00 0.02 0.00 0.02 0.01
Rajasthan 81.40 332.87 414.27 0.00 1.93 7.83 9.75 4.13
Tamil Nadu 771.79 885.17 1,402.07 3,059.03 18.12 20.94 32.96 72.02 30.53
West Bengal 7.07 47.32 54.39 0.17 1.12 0.00 1.29 0.54
Total 1,875.30 4,226.58 3,917.96 10,019.84 44.02 100.00 92.10 236.12 100.00
NHB = National Housing Bank, HUDCO = Housing and Urban Development Corporation Limited, HDFC = Housing Development Finance
Corporation Limited.
Notes: (i) Tamil Nadu, Kerala, Maharashtra, Gujarat, and Andhra Pradesh account for 85.19% of total disbursements.
(ii) For HDFC, the figures are for state cooperatives, state government corporations, private sector, and
major individual loans, accounting for 92.1% of the total funds disbursed.
(iii) For NHB, data cover assistance to the Government. In case of HFC assistance, state data are not available.
(iv) $236.118 million is 78.7% of the total disbursement of $300 million
35.00 30.53
30.00
24.82
25.00
20.00
%
5.00
0.00
Tamilnadu Kerala Maharashtra Gujarat Andhra Pradesh
State
LOAN UTILIZATION
Table A1.4: Disbursement of Loans by State
60.00 55.33
50.00 41.16
40.00
30.00
%
20.00
10.00 3.14
0.00
Karnataka Kerala Tamil Nadu
State
14.82 15.20
15.00
10.00
5.00
0.00
Andhra Pradesh Gujarat Kerala Tamil Nadu
State
50.00 46.10
40.00
30.00
%
$ million
Serial Name of the Subborrower Rs million Equivalent Component
$ million
Serial Name of the Subborrower Rs million Equivalent Component
$ Million
Serial Subborrower State Rs million Equivalent Component
Andaman &
1 State Andaman & Nicobar 6.30 0.15 Housing board and local bodies
Nicobar
2 Andhra Pradesh Housing Board Andhra Pradesh 3.68 0.09 Housing board and local bodies
3 Andhra Pradesh Housing Board Andhra Pradesh 5.68 0.13 Housing board and local bodies
4 Andhra Pradesh Housing Board Andhra Pradesh 8.81 0.21 Housing board and local bodies
5 SHARE, Hyderabad Andhra Pradesh 0.80 0.02 Nongovernment organizations
6 Andhra Pradesh Housing Board Andhra Pradesh 10.69 0.25 Housing board and local bodies
7 TWACHARDO Andhra Pradesh 0.20 0.00 Nongovernment organizations
8 APSHC - East Godavari Andhra Pradesh 30.00 0.71 Housing board and local bodies
9 APSHC - Vizianagram Andhra Pradesh 30.00 0.71 Housing board and local bodies
10 APSHC - Godavari (GII) Andhra Pradesh 30.00 0.71 Housing board and local bodies
11 APSHC - Godavari (GI) Andhra Pradesh 30.00 0.71 Housing board and local bodies
12 APSHC - East & West Godavari Andhra Pradesh 25.01 0.59 Housing board and local bodies
13 APSHC - Karnool, Annanthpur Andhra Pradesh 20.43 0.48 Housing board and local bodies
14 APSHC - Guntur Andhra Pradesh 30.00 0.71 Housing board and local bodies
15 APSHC - Prakasam Andhra Pradesh 27.00 0.64 Housing board and local bodies
16 APSHC - Chitoor Andhra Pradesh 30.00 0.71 Housing board and local bodies
17 APSHC - Nizamabad Andhra Pradesh 30.00 0.71 Housing board and local bodies
18 APSHC - Chitoor Andhra Pradesh 30.00 0.71 Housing board and local bodies
19 APSHC - Cuddupah Andhra Pradesh 26.25 0.62 Housing board and local bodies
20 APSHC - Nellore Andhra Pradesh 15.00 0.35 Housing board and local bodies
21 APSHC - Kurnool Andhra Pradesh 15.00 0.35 Housing board and local bodies
22 TWACHARDO Andhra Pradesh 0.20 0.00 Nongovernment organizations
23 APSHC - Pundar Andhra Pradesh 102.89 2.43 Housing board and local bodies
24 APSHC - AP Andhra Pradesh 125.00 2.96 Housing board and local bodies
25 Assam State Coop Housing Fed Assam 70.08 1.66 Cooperative schemes
26 BSCHFL Bihar 50.00 1.18 Cooperative schemes
27 SHAKTI Mahila Vikas Swalambi Samiti Bihar 0.56 0.01 Nongovernment organizations
28 Sardar Sarovar Nigam Ltd. Gujarat 186.86 4.42 Housing board and local bodies
29 Gujarat HB Gujarat 1.76 0.04 Housing board and local bodies
30 Gujarat HB Gujarat 1.71 0.04 Housing board and local bodies
31 Sardar Sarovar Nigam Ltd. Gujarat 390.61 9.24 Housing board and local bodies
32 Gujarat HB Gujarat 22.37 0.53 Housing board and local bodies
33 SEWA Bank, Ahmedabad Gujarat 9.60 0.23 Nongovernment organizations
34 Surat Municipal Corporation Gujarat 8.90 0.21 Slum improvement
35 Surat Municipal Corporation Gujarat 8.93 0.21 Slum improvement
36 Gujarat HB Gujarat 0.90 0.02 Housing board and local bodies
37 Gujarat HB Gujarat 1.01 0.02 Housing board and local bodies
38 Gujarat HB Gujarat 9.90 0.23 Housing board and local bodies
39 Haryana HB Haryana 22.05 0.52 Housing board and local bodies
40 Haryana HB Haryana 16.81 0.40 Housing board and local bodies
41 Haryana HB Haryana 21.25 0.50 Housing board and local bodies
42 Haryana HB Haryana 17.88 0.42 Housing board and local bodies
43 Haryana HB Haryana 5.45 0.13 Housing board and local bodies
44 Haryana HB Haryana 5.54 0.13 Housing board and local bodies
45 Haryana HB Haryana 3.37 0.08 Housing board and local bodies
46 Haryana HB Haryana 3.41 0.08 Housing board and local bodies
47 HPHB Himachal Pradesh 4.78 0.11 Housing board and local bodies
48 HPHB Himachal Pradesh 2.45 0.06 Housing board and local bodies
49 Jammu Kashmir Coop Housing Fed Jammu & Kashmir 6.26 0.15 Cooperative schemes
50 Jammu Kashmir Coop Housing Fed Jammu & Kashmir 7.06 0.17 Cooperative schemes
51 Karnataka Slum Clearance Board Karnataka 1.79 0.04 Slum improvement
22 Appendix 2
$ Million
Serial Subborrower State Rs million Equivalent Component
$ Million
Serial Subborrower State Rs million Equivalent Component
$ Million
Serial Subborrower State Rs million Equivalent Component
165 TNCHF - Dingigual Anna Tamil Nadu 0.97 0.02 Cooperative schemes
166 TNCHF - Perambur Tamil Nadu 10.00 0.24 Cooperative schemes
167 TNCHF - Vellore Tamil Nadu 20.00 0.47 Cooperative schemes
168 TNCHF - Tirunelveli Tamil Nadu 26.00 0.62 Cooperative schemes
169 TNCHF - Dharmapuri Tamil Nadu 24.00 0.57 Cooperative schemes
170 TNCHF - Trichy Tamil Nadu 12.00 0.28 Cooperative schemes
171 TNCHF - Madurai Tamil Nadu 16.00 0.38 Cooperative schemes
172 TNCHF - Theni Tamil Nadu 14.00 0.33 Cooperative schemes
173 TNCHF - Erode Tamil Nadu 20.00 0.47 Cooperative schemes
174 TNCHF - Madurai & Theni Tamil Nadu 45.65 1.08 Cooperative schemes
175 TNCHF - Karur, Thiran, Chinnamalai Tamil Nadu 16.66 0.39 Cooperative schemes
176 TNCHF - ESW Tamil Nadu 19.02 0.45 Cooperative schemes
177 TNCHF - MIG Tamil Nadu 22.83 0.54 Cooperative schemes
178 Tamil Nadu Slum Clearance Board Tamil Nadu 1.54 0.04 Slum improvement
179 TNCHF - Marginal Farmers Tamil Nadu 10.20 0.24 Cooperative schemes
180 Tamil Nadu HB Tamil Nadu 4.82 0.11 Housing board and local bodies
181 Community Action for Rural Development Tamil Nadu 0.41 0.01 Nongovernment organizations
182 TNCHF - Cuddalore, Viluparam Tamil Nadu 10.85 0.26 Cooperative schemes
183 TNCHF - Chennai, Kanchipuram Tamil Nadu 8.82 0.21 Cooperative schemes
184 TNCHF - Thanjuvar, Thiruarur Tamil Nadu 8.82 0.21 Cooperative schemes
185 Tamil Nadu HB Tamil Nadu 29.73 0.70 Housing board and local bodies
186 TNCHF - Salem Tamil Nadu 21.13 0.50 Cooperative schemes
187 TNCHF - Namakal Tamil Nadu 11.86 0.28 Cooperative schemes
188 TNCHF - Peryar Tamil Nadu 6.19 0.15 Cooperative schemes
189 TNCHF - Salem & Namakal Tamil Nadu 6.78 0.16 Cooperative schemes
190 TNCHF - Thirulvellikal Tamil Nadu 6.78 0.16 Cooperative schemes
191 TNCHF - Sivagangalikal Tamil Nadu 5.41 0.13 Cooperative schemes
192 MASS West Bengal 0.95 0.02 Nongovernment organizations
193 SA Samaj West Bengal 1.22 0.03 Nongovernment organizations
194 WBHB West Bengal 23.80 0.56 Housing board and local bodies
195 WB State Coop Agriculture Development West Bengal 16.40 0.39 Cooperative schemes
196 Tarun Sangha West Bengal 4.95 0.12 Nongovernment organizations
Total 4,226.58 100.00
Average rate of exchange:Rs. 42.2658 =$1
Source: Housing and Urban Development Corporation Limited.
Table A2.3: Loan No. 1551-IND: Housing Finance Project – HDFC
(details of subloans)
$Million
Serial Name of the Subborrower State Rs million Equivalent Component
1 Tamil Nadu Cooperative Housing Federation Limited Tamil Nadu 250.00 5.88 Cooperative schemes
2 Kerala State Cooperative ARDB Kerala 47.50 1.10 Cooperative schemes
3 Tamil Nadu Cooperative Housing Federation Limited Tamil Nadu 250.00 5.78 Cooperative schemes
4 Karnataka Power Corporation Limited Karnataka 13.20 0.31 State government corporation
5 MP Housing Board-LOC Madhya Pradesh 246.20 5.69 State government corporation
6 Tamil Nadu Police Housing Corporation Limited Tamil Nadu 589.56 13.86 State government corporation
7 Maharashtra State Police Housing Corporation Ltd Maharashtra 21.90 0.51 State government corporation
8 Tamil Nadu Housing Board-LOC Tamil Nadu 109.50 2.57 State government corporation
9 Maharashtra State Police Housing & Welfare Corporation Maharashtra 58.28 1.49 State government corporation
10 Karnataka State Police Housing Corporation Karnataka 325.50 6.93 State government corporation
11 Government of Rajasthan Rajasthan 82.13 2.10 State government
12 Government of Rajasthan Rajasthan 100.00 2.56 State government
13 Government of Rajasthan Rajasthan 150.74 3.85 State government
14 Kovai Maruthi Papers Tamil Nadu 2.50 0.06 Private sector
15 Premier Polytronics Tamil Nadu 16.20 0.37 Private sector
16 Prime Cotton Textiles Tamil Nadu 6.30 0.15 Private sector
17 Larsen & Toubro-Tadapatri project Andhra Pradesh 200.00 4.70 Private sector
18 Larsen & Toubro-Amreli project Gujarat 186.00 4.37 Private sector
19 Individuals 1,598.41 37.70 Individuals
Total 4,253.92 100.00
Average rate of exchange: Rs42.5392 = $1
Appendix 2
Source: Housing Development Finance Corporation Limited.
25
26 Appendix 3
LENDING CHANNELS
Lending Channels for National Housing Bank, Housing and Urban Development
Corporation Limited and Housing Development Finance Corporation Limited
A. NHB
(i) NHB lends to State Cooperatives, HFCs and commercial banks. State
cooperatives in turn on-lend to primary housing cooperatives for their
direct lending to member beneficiaries. HFCs and commercial banks
on-lend to households,
(ii) NHB lends to HFCs who on-lend to CFIs and NGOs. The latter in turn
on-lend to households, and
(iii) NHB lends to HFCs who on-lend directly to households.
B. HUDCO
C. HDFC
Date Event
1996
5 Dec TA 2700-IND: Housing Finance Facility Project approved and carried out from
January to April 1997 resulting in a proposal for the Housing Finance Project.
1997
22 Apr-7 May Fact Finding.
4 June Management Review Meeting.
17-31 July Loan Appraisal.
25-28 Aug Loan Negotiations.
25 Sep Board Approval.
6 Nov Loan Signing.
11 Dec Loans to HUDCO and HDFC declared effective.
12 Dec Loan to NHB declared effective.
24 Dec Advance of $20 million to HDFC.
31 Dec Advances of $20 million each to NHB and HUDCO.
1998
19-29 Jan Inception Mission.
2 Jul Liquidation of $20 million by HDFC.
7 Sep Liquidation of $20 million by NHB.
7 Oct Liquidation of $18 million by HUDCO.
10 Nov Liquidation of $2 million by HUDCO.
12 Nov Advance of $30 million and $40 million each to NHB and HDFC.
13 Nov Advance of $30 million to HUDCO.
12-22 Oct Review (1). The Mission found that the Borrowers and Government of India are
in general compliant with the Loan Covenants. The Project implementation was
efficient and effective. Based on the projections from the Borrowers, the Mission
estimates that the loan proceeds would be fully disbursed and liquidated by end-
2000.
1999
1 Jan Delegation of the Project to India Resident Mission for administration.
26 Jan Liquidation of $40 million by HDFC.
19 Jul Liquidation of $8.9 million by HUDCO.
23 Jul Advance of $40 million to HDFC.
3 Sep Liquidation of $3.3 million by HUDCO.
2 Nov Liquidation of $17.8 million by HUDCO.
1 Dec 1999- Review (2). The three loans for the Project fully utilized and the Mission
23 Feb 2000 recommended closure in September 2000 after completion of the SOE
verification by India Resident Mission. The Mission noted that although significant
progress was made in the implementation of the policy and institutional action
plan, dialogue with the Government on further actions to strengthen and expand
the housing finance system should continue with the processing of the proposed
Housing Finance II Project.
Appendix 4 29
2000
6-18 Mar & Disbursement Review (1). Loans 1550/51-IND. Visited project sites and field
4-5 Apr offices in Andhra Pradesh and Tamil Nadu and met with senior officials of
HUDCO and HDFC. The Mission reported ineligible claims relating to HUDCO
and HDFC and informed the respective Borrowers. Review determined that
HUDCO should adopt practices for instilling financial discipline to ensure project
viability and cost recovery.
29 May Liquidation of $19.9 million by HDFC.
24 July-10 Disbursement Review (2). Loans 1549/50/51-IND. Mission findings: (i) ineligible
Aug expenses relating to NHB, (ii) sought information from HUDCO for further
scrutiny, (iii) concluded HUDCO relies on state government guarantee and has
not been monitoring its loan portfolio sufficiently in such cases, and (iv) HUDCO’s
monitoring of NGO loans displayed diligence and considerable care.
10 Dec Terminal date for commitments under HUDCO and HDFC loans.
11 Dec Terminal date for commitments under NHB.
27 Dec Liquidation of $14.6 million by HDFC.
2001
10-16 Jan Disbursement Review (3). Loan 1550-IND. This Mission was a follow-up to an
earlier Mission fielded in CY2000. The Mission determined further ineligible
expenditures.
26 Jan Liquidation of $5.449 million by HDFC, achieving total loan utilization, and closing
date of the HDFC loan.
26 Feb-10 Disbursement Review (4). Loans 1549/50/51-IND. A Mission from India Resident
Mar Mission visited the state of Karnataka. The Mission concluded that a limited SOE
review in two states (Karnataka and Kerala) identified deficiencies in the records
maintained by HUDCO to substantiate loan utilization. To determine the nature
and extent of ineligible expenses, the Mission recommended an external audit by
qualified chartered accountants.
In case of the NHB component, the Mission recommended substitution of
identified ineligible expenditure with other eligible expenditure.
3, 11-12 Apr Disbursement Review (5). Loan 1549-IND. The Mission visited the headquarters
of NHB to carry out a full review of all the supporting documents maintained by
NHB for the liquidation of $20 million. The Mission recommended: (i) an amount
of $12 million equivalent was ineligible and required to be substituted, (ii) sought
information regarding disbursement to TNACHF, and (iii) HUDCO was requested
to confirm if scheme No. 14,531 was claimed from both NHB and ADB.
23-25 May Disbursement Review (6). Loan 1551-IND. A Mission visited Bhopal, Madhya
Pradesh office of HDFC. The Mission concluded that ADB loan proceeds, which
comprise 66% of HDFC’s loan to MPHB have been utilized for the Project
purposes of construction of housing units. The Mission requested HDFC to
provide a final physical and financial status along with list of beneficiaries funded.
30 Appendix 4
4 Jun-8 Aug Loan 1550-IND. Staff consultants fielded by ADB in the states of Meghalaya,
Andhra Pradesh, Tamil Nadu and Kerala which accounted for $69.95 million in
loan utilization to review adequacy of accounts and records maintained by
HUDCO and to identify both the physical and financial progress of sub-projects
financed out of the loan proceeds. An Audit Review Mission from Office of the
General Auditor joined the Consultants from 30 July to 3 August to observe the
consultant’s review of the HUDCO’s SOE and discuss the findings and possible
recommendations. The Office of General Auditor Mission observed: (i) lack of
monitoring procedure of the EA should have been identified during appraisal; (ii)
project reviews by India Resident Mission appear to be an effective tool in
determining appropriate use of funds for project purposes.
4 Dec The Staff Consultants submitted their report. The findings established the extent
of ineligible expenses to be $10.2 million and requested HUDCO to provide
additional information to justify expenses amounting to $18.4 million. The
Consultants also observed inadequacies in the maintenance of records and
accounts, monitoring procedures, and commented upon the poor recovery
performance of HUDCO borrowers.
2002
27 Jun-9 Jul Project cum Disbursement Review (7). Loan 1550-IND. The Mission reviewed a
set of randomly selected schemes, out of the 30 schemes offered as substitution
of ineligible schemes by HUDCO in three states. Based on the findings on the
field, the Mission recommended that an expenditure totaling $10.33 million
relating to 28 schemes be accepted for reimbursement.
22 Nov HDFC could not provide details of beneficiaries assisted under the line of credit of
$6.936 million to the GOR. In substitution, HDFC offered a subloan to Karnataka
State Police Housing Corporation Limited. With the approval of the substitution,
India Resident Mission issued LMED for closure of the HDFC component of the
Project effective 26 January 2001.
27 Dec NHB replaced ineligible expenses identified by earlier review missions with new
subloans, which was processed and approved by India Resident Mission. With
the replacement of ineligible expenditures, India Resident Mission issued LMED
for closure of the loan effective 23 December 1999.
27 Dec India Resident Mission recommended approval of subloans amounting to $26.8
million to substitute the ineligible expenses and issued LMED for closure of the
HUDCO loan effective 6 December 1999.
2003
30 Jun Original loan closing date for the three loans.
GOR = Government of Rajasthan, HUDCO = Housing and Urban Development Corporation Limited, HDFC =
Housing Development Finance Corporation Limited, LMED = Loan Milestone Events Date, MPHB = Madhya Pradesh
Housing Board, NOG = nongovernment organization, SOE = statement of expenditure, TA = technical assistance,
TNACHF = Tamil Nadu Apex Cooperative Housing Federation.
Appendix 5 31
Board of Directors
Senior Executive Executive Director Executive Executive Director Executive Director Chief Executive Executive Executive
Director and (organizational Director (administration and (management services Vigilance Director Director (works Director
Executive Director system) (training) building technology and human resource Officer (north east and disposal) (law)
(projects) transfer development zone
Appendix 6
33
34 Appendix 6
Board of Directors
Chairman
Managing Director
Technical Services
Department
Corporate Legal
Communications
Human Resouce
Development & Centre
for Housing Finance
Information Technology
Cumulative
HUDCO 1999 2000 2001 2002 Upto 2002
Housing
Sanctions 40,170 47,810 38,710 25,750 228,630
Releases 19,280 26,670 28,500 18,250 187,340
Urban Infrastructure
Sanctions 26,590 41,470 40,420 55,650 191,490
Releases 12,730 17,460 19,870 28,360 106,000
Total
Sanctions 66,760 89,080 79,130 81,410 420,120
Releases 32,010 43,740 48,290 46,610 293,340
% of releases 48 49 61 57
Cumulative
HDFC 1999 2000 2001 2002 Upto 2002
Approvals 40,718 53,052 68,798 90,413 401,360
Disbursements 34,243 44,927 58,030 76,166 335,700
% of disbursements 84 85 84 84
Composition of Loans Outstanding (%)
Individuals 69 72 73 73
Corporates 30 27 26 26
Others 1 1 1 1
Source: Borrowers' reports.
36 Appendix 8
Assets
Cash and Bank Balances
Cash in hand and Balance with RBI 4 12 20 5
Balance with other banks in India and outside 282 1,528 4237 4051
Subtotal 285 1,540 4,257 4,056
Money at call and at short notice - - 311 -
Investments
Securities of Central and State Governments 1,304 1,333 753
Stocks, shares, bonds, debentures and 89 146 143 151
securities of Housing Finance Institutions
Stocks, shares, bonds, debentures, and 3,806 4,842 2,343 968
securities of other Institutions
Subtotal 5,199 6,321 3,238 1,119
Loans and Advances
Housing Finance Institutions 27,245 32,280 37,420 41,988
Scheduled Banks 869 531 1,456 2,068
State Cooperative Agricultural Rural 3,435 3,971 4,641 5,354
Development Banks/Land Development Banks
Others 220 608 998 1,859
Subtotal 31,769 37,389 44,515 51,269
Bills Purchased, discounted/rediscounted
Fixed Assets (at cost less depreciation)
Land 113 112 99 97
Premises 189 180 169 162
Others 14 11 10 13
Subtotal 316 302 277 273
Other Assets 11,447 12,169 13,588 4,780
HLA deposits with Banks/HFCs (as per contra) 1,934 1,880 1,796 1,599
Total (Assets) 50,950 59,601 67,982 63,095
Source: National Housing Bank.
Table A8.2: Income Statements of National Housing Bank
Fiscal Year ending 30 June
Expenses
Interest paid on deposits, borrowings, etc. 4,005.60 4,680.40 5,155.30 5,935.30
Establishment Expensesa 111.80 81.30 98.60 140.00
Directors', executive committee members' 0.10 0.10 0.20 0.50
fees & expenses
Auditors' fees 0.10 0.10 0.10 0.20
Rent, taxes, insurance, lighting, etc. 16.20 10.80 11.40 12.20
Law charges 9.10 7.40 22.80 14.00
Postage, telegram, telex, and telephone 2.90 2.10 2.80 2.90
Stationery, printing, advertisement, etc. 8.70 6.80 12.20 6.50
Depreciation, amortization 17.10 16.00 16.20 12.60
Other expenditure 27.20 26.50 29.40 27.20
Balance of profit carried down 585.20 836.90 1,113.60 1,582.10
Subtotal 4,784.00 5,668.40 6,462.60 7,733.50
Income
Interest and Discount 4,067.30 4,853.60 5,825.90 7,354.30
Income from investments 662.10 786.20 498.90 124.60
Commission, brokerage, etc. - - - -
Other income 54.60 28.60 137.80 254.60
Appendix 8
Subtotal 4,784.00 5,668.40 6,462.60 7,733.50
Balance of Profit brought down 585.20 836.90 1,113.60 1,582.10
Transfer from Investment Fluctuation Reserve - - - 127.70
Total 585.20 836.90 1,113.60 1,709.80
37
a
includes Staff salaries, allowances, etc., and terminal benefits, underwriting commission, brokerage and guarantee fee, and travelling expenses.
Source: National Housing Bank.
38 Appendix 8
Asset-Liquidity Management
Less than More than More than More than More than Total
or equal to 1 year up 3 years up 5 years up 7 years
1 year to 3 years to 5 years to 7 years
Rupee assets 15,215.80 21,868.60 19,012.90 13,627.40 20,137.60 89,862.30
Foreign currency assets 283.20 589.90 634.60 670.20 5,767.30 7,945.20
Total Assets 15,499.00 22,458.50 19,647.50 14,297.60 25,904.90 97,807.50
Rupee liabilities 9,079.50 18,272.80 25,772.10 8,487.90 32,275.80 93,888.10
Foreign currency liabilities 408.60 823.50 850.10 867.10 6,456.90 9,406.20
Total Liabilities 9,488.10 19,096.30 26,622.20 9,355.00 38,732.70 103,294.30
Source: National Housing Bank.
Less than More than More than More than More than Total
or equal to 1 year up 3 years up 5 years up 7 years
1 year to 3 years to 5 years to 7 years
Rupee assets 13,682.20 21,742.00 15,712.70 13,467.30 20,042.70 84,646.90
Foreign currency assets 217.80 680.90 688.80 697.50 5,289.50 7,574.50
Total Assets 13,900.00 22,422.90 16,401.50 14,164.80 25,332.20 92,221.40
Rupee liabilities 8,005.00 20,495.90 11,447.60 12,012.90 40,306.40 92,267.80
Foreign currency liabilities 345.30 921.10 909.90 900.10 6,047.80 9,124.20
Total Liabilities 8,350.30 21,417.00 12,357.50 12,913.00 46,354.20 101,392.00
Source: National Housing Bank.
Appendix 9 39
Assets
Cash and Bank Balances
Cash in hand and Balance with RBI 532 1,079 275 1,278
Balance with scheduled banks 9,647 9,594 8,385 8,201
Subtotal 10,179 10,674 8,660 9,478
Investments 499 2,517 2,293 2,099
Deferred Tax assets - - - 539
Loans and Advances 99,112 130,233 162,779 186,442
Fixed Assets (at cost less depreciation)
Land 90 87 86 93
Premises 442 440 466 482
Others 76 85 130 135
Subtotal 608 612 682 710
Current Assets (less cash & bank balances, loans 1,454 1,468 760 986
and advances)
Miscellaneous expenditure not adjusted 247 184 151 427
Total 112,098 145,688 175,325 200,681
Source: Housing and Urban Development Corporation Limited.
40 Appendix 9
Table A9.2: Income Statements of Housing and Urban Development Corporation Limited
Fiscal Year ending 31 March
(Rs million)
Income
Interest from loans, deposits, staff, and investment 10,072 14,101 18,425 20,469
Profit on sale of investments 0 - 2 2
Net income from consultancy 1 4 2 6
Fees and other charges 283 323 288 225
Other income 2,027 1,452 1,593 1,031
Total 12,384 15,881 20,309 21,732
Table A9.3: Ratio Analysis of Housing and Urban Development Corporation Limited
Profit after Tax to Capital Employed (%) 0.68 0.68 0.64 0.64
Profit after Tax to Average Assets (%) 0.78 0.77 0.71 0.64
Debt-Equity Ratio 8.28 7.98 7.5 7.64
Capital Adequacy Ratio (%) 8.28 8.13 9.49
Debt Service Coverage Ratio 1.17 1.29 0.95 1.28
INCOME
Interest on loans 11,551 13,285 16,263 19,819
Dividends 969 1,485 1,217 760
Lease rental income 641 447 475 507
Other operating income 3,617 4,159 4,782 4,716
Fees and other charges 690 757 1,028 1,122
Other income 59 22 58 77
Appendix 10
43
44 Appendix 10
Table A11.1: Status of Compliance with Major Loan Covenants – National Housing Bank
The guarantor and the borrower will ensure that any LA, Schedule 3, Not applicable.
involuntary resettlement resulting from the para. 2
implementation of any qualified proposal or subproject
and compensation paid thereof are undertaken in
accordance with Asian Development Bank (ADB) policy
and requirements and to ADB’s satisfaction.
The borrower will cooperate in implementing a program LA, Schedule 3, Not complied with.
for benefit monitoring and evaluation (BME) of the para. 3 (a)
Project, encompassing timely realization of benefits and
completion of physical and other aspects of the Project,
especially in respect of households and cost recovery.
BME activities will be turned over to the qualified LA, Schedule 3, Not complied with.
enterprises and the result of BME incorporated into a para. 3 (b)
project evaluation to be undertaken after project
implementation. Baseline conditions will be established
when qualified housing proposals and subprojects are
prepared. The BME will be carried out in accordance
with ADB’s Benefit, Monitoring, and Evaluation
Handbook and tailored to meet project conditions. The
borrower will provide ADB with the results of the BME in
the first quarterly report for each year, referred to in
Section 5.05 (b) of the Loan Agreement.
Except as ADB may otherwise agree, the borrower will LA, Section 3.03 Complied with.
submit to ADB for prior approval the first five qualified
housing proposals.
The borrowers will ensure that subloans are made only LA, Section 4.04 Complied with.
to state and municipal agencies, cooperatives, or others
that (i) are not delinquent or otherwise in arrears in
repayment of other debt obligations; and (ii) are from
those states or union territories that are taking or have
agreed to take steps to reduce stamp duties on real
estate transactions and amend the Rent Control Laws,
consistent with the Action Plan.
46 Appendix 11
The borrower will always protect itself against any loss LA, Section 5.02 Complied with.
resulting from changes in the rate of exchange between
the rupee and currency or currencies in which the
borrower’s outstanding money obligations will have to
be met.
The borrower will ensure that all funds, including local- LA, Section 5.03 Complied with.
currency funds, in addition to the loan proceeds, and
other resources that are required for the Project by
qualified enterprises to carry out their respective
Qualified Housing Proposals and Subprojects will be
available to such qualified enterprises promptly as
needed.
The borrower will maintain records and accounts LA, Section 5.04 Partially complied
adequate to record the progress of the Project and of with.
each Qualified Housing Proposal and Subproject
(including the cost thereof) and to reflect, in accordance
with consistently maintained sound principles, the
operations and financial condition of the borrower.
The borrower will furnish to ADB all such reports and LA, Section 5.05 (a) Partially complied
information as ADB will reasonably request concerning with.
(i) the loan and the expenditure of the proceeds and
maintenance of the service thereof; (ii) the Project; (iii)
qualified enterprises, Qualified Housing Proposals and
Subprojects, and subloans; (iv) administration,
operations, and financial condition of the borrower; and
(v) any other matters relating to the purposes of the
loan.
Without limiting the generality of the foregoing, the LA, Section 5.05 (b) Complied with.
borrower will furnish to ADB quarterly reports on the
execution of the Project and on the operation and
management of the borrower. Such reports will be
submitted in such form and in such detail and within
such a period as ADB will reasonably request, and will
indicate, among other things, progress made and
problems encountered during the quarter under review,
steps taken and proposed to be taken to remedy these
problems, and a proposed program of activities and
expected progress during the following quarter.
Appendix 11 47
Promptly after the closing date for withdrawals from the LA, Section 5.05 (c) Complied with.
loan account, in any event not later than 3 months after
the said closing date or such later date as may be
agreed on for this purpose between ADB and the
borrower, the borrower will prepare and furnish to ADB
a report, in such form and in such detail as ADB will
reasonably request, on the utilization of the loan, the
execution of the qualified housing proposals and
subprojects, their costs, the performance by the
borrower of its obligations under this Loan Agreement
and the accomplishment of the purposes of the loan.
The borrower will have its account and financial LA, Section 5.06 (a) (i) Complied with.
statements (balance sheet, statement of income and
expenses, and related statements) audited annually, in (ii) Not complied
accordance with appropriate audited standards with.
consistently applied, by independent auditors whose
qualifications, experience, and terms of reference are
acceptable to ADB; and will, promptly after their
preparation but in any event not later than 12 months
after the close of the financial year to which they relate,
furnish to ADB (i) certified copies of the audited
accounts and financial statements and (ii) the report of
the auditors relating thereto (including the auditors’
opinion on the use of loan proceeds and compliance
with the covenants of this loan agreements as well as
on the use of procedures for the imprest account and
statement of expenditure, all in the English language.
The borrower will furnish to ADB such further
information concerning such accounts and financial
statements and the audit thereof as ADB will from time
to time reasonably request.
The borrower will enable ADB’s representatives to LA, Section 5.07 Complied with.
inspect any Qualified Enterprise, any Qualified Housing
Proposal and Subproject, goods financed out of the
proceeds of the Loan, and any relevant records and
documents maintained by the borrower.
48 Appendix 11
The borrower will at all times conduct its business in LA, Section 5.08 (b) Complied with.
accordance with sound administrative, financial,
environmental, business, and housing practices, and
under the supervision of competent and experienced
management and personnel.
Except as ADB and the borrower may otherwise agree, LA, Section 5.08 ( c) Complied with.
the borrower will not sell, lease, or otherwise dispose of
any of its assets, except in the ordinary course of its
business.
Before establishing or acquiring any subsidiary, the LA, Section 5.08 (d) Complied with.
borrower will inform ADB of any such action.
The borrower will keep ADB informed of any material LA, Section 5.08 (e) Complied with.
event having a substantial and adverse impact on the
borrower’s administrative, financial equity, and lending
operations, including decisions resulting from judicial
actions and other forms of litigation.
Except as ADB and the borrower may otherwise agree, LA, Section 5.09 Complied with.
the borrower will maintain a ratio of the consolidated
debt to consolidated equity not higher than 15:1.
Except as ADB may otherwise agree, the borrower will LA, Section 5.10 Complied with.
ensure that the consolidated internal cash generation
for debt service for each financial year will be at least
1.2 times the consolidated debt-service requirement for
that financial year.
The borrower undertakes that, except as ADB and the LA, Section 5.12 (a) Complied with.
borrowers may otherwise agree, (i) if the borrower and
any subsidiary create any lien on any of their assets as
security for any debt, such lien will ipso facto equally
and ratably secure the payment of the principal of, and
interest and other charges on, the Loan, and the
borrower, in creating or permitting the creation of any
such lien, will make express provision to that effect; and
(ii) if any statutory lien is created on any assets of the
borrower or any subsidiary as security for any debt, the
borrower will grant to ADB an equivalent lien
satisfactory to ADB.
Appendix 11 49
Table A11.2: Status of Compliance with Major Loan Covenants – Housing and Urban
Development Corporation Limited
The guarantor and the borrower will execute the action plan Loan Agreement Partly complied
to the extent that actions thereunder are applicable to or the (LA), Schedule with.
responsibility of the guarantor or the borrower. 3, para. 1
The guarantor and the borrower will ensure that any LA, Schedule 3, Not applicable.
involuntary resettlement resulting from the implementation para. 2
of any qualified proposal or subproject and compensation
paid thereof are undertaken in accordance with Asian
Development Bank (ADB) policy and requirements and to
ADB’s satisfaction.
The borrower will cooperate in implementing a program for LA, Schedule 3, Not complied
benefit monitoring and evaluation (BME) of the Project, para. 3 (a) with.
encompassing timely realization of benefits and completion
of physical and other aspects of the project, especially in
respect of households and cost recovery.
BME activities will be turned over to the qualified LA, Schedule 3, Not complied
Enterprises and the result of BME incorporated into a para. 3 (b) with.
project evaluation to be undertaken after project
implementation. Baseline conditions will be established
when qualified housing proposals and Subprojects are
prepared. The BME will be carried out in accordance with
ADB’s Benefit, Monitoring, and Evaluation Handbook, and
carefully tailored to meet project conditions. The borrower
will provide ADB with the results of the BME in the first
quarterly report for each year, referred to in Section 5.05 (b)
of the Loan Agreement.
The borrower will ensure that all subprojects conform to the LA, Schedule 3, The borrower
requirements of ADB in respect of procurement, para. 4 complied with
environment, resettlement, and compensation, among other the LA’s
requirements. More specifically, the subproject will be stipulation of
selected on the basis of such criteria as may be agreed to minimum
by ADB, including the following: lending to low-
income
(i) significant development impact on low-income households. In
groups, with preference to women, certain locations,
(ii) significant demonstration impact such that other the review
cities, areas, institutions, or beneficiaries wish to missions noticed
participate in similar subprojects, emphasis on
(iii) cost-effectiveness based on a large number of ownership by
beneficiaries per unit cost, women.
50 Appendix 11
Except as ADB may otherwise agree, the borrower will LA, Section Complied with.
submit to ADB for prior approval the first five qualified 3.03
housing proposals.
The borrowers will ensure that subloans are made only to LA, Section Complied with.
state and municipal agencies, cooperatives, or others that 4.04
(i) are not delinquent or otherwise in arrears in repayment
of other debt obligations; and (ii) are from those states or
union territories that are taking or have agreed to take steps
to reduce stamp duties on real estate transactions and
amend the Rent Control Laws, consistent with the Action
Plan.
The borrower will carry out the Project with due diligence LA, Section Complied with.
and efficiency and in conformity with sound banking, 5.01 (a)
administrative, financial, engineering, environmental,
business, and housing practices.
The borrower will always protect itself against any loss LA, Section 5.02 Complied with.
resulting from changes in the rate of exchange between the
rupee and the currency or currencies in which the
borrower’s outstanding money obligations will have to be
met.
Appendix 11 51
The borrower will maintain records and accounts adequate LA, Section 5.04 Insufficient
to record the progress of the Project and of each qualified compliance.
housing Proposal and Subproject (including the cost
thereof) and to reflect in accordance with consistently
maintained sound accounting principles, the operations and
financial condition of the borrower.
The borrower will furnish to ADB all such reports and LA, Section Partly complied
information as ADB will reasonably request concerning the 5.05 (a) with.
loan and the expenditure of the proceeds and maintenance
of the service thereof; (ii) the project; (iii) the qualified
Enterprises, the qualified housing proposals and
Subprojects, and the sub loans; (iv) the administration,
Operations and financial condition of the borrower; and (v)
any other matters relating to the purposes of the Loan.
Without limiting the generality of the foregoing, the borrower LA, Section Partly complied
will furnish to ADB quarterly reports on the execution of the 5.05 (b) with.
Project and on the operation and management of the
borrower. Such reports will be submitted in such form and
in such detail and within such a period as ADB will
reasonably request, and will indicate, among other things,
progress made and problems encountered during the
quarter under review, steps taken and proposed to be taken
to remedy these problems, and proposed programe of
activities and expected progress during the following
quarter.
Promptly after the closing date for withdrawals from the LA, Section Complied with.
loan account, in any event not later than three months after 5.05 (c)
the said closing date or such later date as may be agreed
for this purpose between ADB and the borrower, the
borrower will prepare and furnish to ADB a report, in such
form and in such detail as ADB will reasonably request, on
the utilization of the loan, the execution of the qualified
housing proposals and subprojects, their costs, the
performance by the borrower of its obligations under this
Loan Agreement and the accomplishment of the purposes
of the loan.
52 Appendix 11
The borrower will have its account and financial statements LA, Section (i) Complied
(balance sheet, statement of income and expenses, and 5.06 (a) with.
related statements) audited annually, in accordance with
appropriate audited standards consistently applied, by (ii) Not complied
independent auditors whose qualifications, experience and with .
terms of reference are acceptable to ADB; and will,
promptly after their preparation but in any event not later
than 12 months after the close of the financial year to which
they relate, furnish to ADB (i) certified copies of the audited
accounts and financial statements and (ii) the report of the
auditors relating thereto (including the auditors’ opinion on
the use of loan proceeds and compliance with the
covenants of this loan agreements as well as on the use of
procedures for the imprest account and statement of
expenditure, all the English language. The borrower will
furnish to ADB such further information concerning such
accounts and financial statements and the audit thereof as
ADB will from time to time reasonably request.
The borrower will enable ADB’s representatives to inspect LA, Section 5.07 Complied with.
any qualified Enterprise, any qualified housing Proposal
and Subproject, the goods financed out of the proceeds of
the Loan, and any relevant records and documents
maintained by the borrower.
The borrower will, promptly as required, take all action LA, Section Complied with.
within its powers to maintain its corporate existence, to 5.08 (a)
carry on its operations and to acquire, maintain and renew
all rights, properties, powers, privileges and franchises
which are necessary in the carrying out of the project or in
the conduct of its business.
The borrower will at all times conduct its business in LA, Section .08 Complied with.
accordance with sound administrative, financial, (b)
environmental, business and housing practices, and under
the supervision of the competent and experienced
management and personnel.
Except as ADB and the borrower may other agree, the LA, Section .08 Complied with.
borrower will not sell, lease or otherwise dispose of any of (c)
its assets, except in the ordinary course of its business.
Prior to establishing or acquiring any subsidiary, the LA, Section 5.08 Complied with.
borrower will inform ADB of any such action. (d)
Appendix 11 53
The borrower will keep ADB informed of any material event LA, Section Complied with.
having a substantial and adverse impact on its 5.08 (e)
administrative, financial equity and lending operations,
including decisions resulting from judicial actions and other
forms of litigation.
Except as ADB and the borrower may otherwise agree, the LA, Section 5.09 Complied with.
borrower will maintain a ratio of the consolidated debt of
the borrower to the consolidated equity of the borrower not
higher than 15:1.
Except as ADB may otherwise agree, the borrower will LA, Section 5.10 Partly complied
undertake its operations so as to ensure that the with.
consolidated internal cash generation for debt service for
each financial year will be at least 1.2 times the
consolidated debt-service requirement for that financial
year.
The borrower undertakes that, except as ADB and the LA, Section Complied with.
borrowers may otherwise agree, (i) if the borrower and any 5.12 (a)
subsidiary create any lien on any of its assets as security
for any debt, such lien will ipso facto equally and ratably
secure the payment of the principal of, and interest and
other charges on, the Loan and the borrower, in creating or
permitting the creation of any such lien, will make express
provision to that effect; and (ii) if any statutory lien will be
created on any assets of the borrower or any subsidiary as
security for any debt, the borrower will grant to ADB an
equivalent lien satisfactory to ADB.
54 Appendix 11
The guarantor and the borrower will execute the action plan Loan Agreement Partly complied
to the extent that actions thereunder are applicable to or the (LA), Schedule with.
responsibility of the guarantor or the borrower. 3, para. 1
The guarantor and the borrower will ensure that any LA, Schedule 3, Not applicable.
involuntary resettlement resulting from the implementation para. 2
of any qualified proposal or subproject and compensation
paid thereof are undertaken in accordance with Asian
Development Bank (ADB) policy and requirements and to
ADB’s satisfaction.
The borrower will cooperate in implementing a program for LA, Schedule 3, Not complied
benefit monitoring and evaluation (BME) of the Project, para. 3 (a) with.
encompassing timely realization of benefits and completion
of physical and other aspects of the project, especially in
respect of households and cost recovery.
BME activities will be turned over to the qualified LA, Schedule 3, Not complied
Enterprises and the result of BME incorporated into a para. 3 (b) with.
project evaluation to be undertaken after project
implementation. Baseline conditions will be established
when qualified housing proposals and Subprojects are
prepared. The BME will be carried out in accordance with
ADB’s Benefit, Monitoring, and Evaluation Handbook, and
carefully tailored to meet project conditions. The borrower
will provide ADB with the results of the BME in the first
quarterly report for each year, referred to in Section 5.05 (b)
of the Loan Agreement.
The borrower will ensure that all subprojects conform to the LA, Schedule 3, The borrower
requirements of ADB in respect of procurement, para. 4 complied with
environment, resettlement, and compensation, among other the LA’s
requirements. More specifically, the subproject will be stipulation of
selected on the basis of such criteria as may be agreed to minimum
by ADB, including the following: lending to low-
income
(i) significant development impact on low-income households. In
groups, with preference to women, certain locations,
(ii) significant demonstration impact such that other the review
cities, areas, institutions, or beneficiaries wish to missions noticed
participate in similar subprojects, emphasis on
(iii) cost-effectiveness based on a large number of ownership by
beneficiaries per unit cost, women.
Appendix 11 55
Except as ADB may otherwise agree, the borrower will LA, Section Complied with.
submit to ADB for prior approval the first five qualified 3.03 (a)
housing proposals.
The borrowers will ensure that subloans are made only to LA, Section Complied with.
state and municipal agencies, cooperatives, or others that 4.04
(i) are not delinquent or otherwise in arrears in repayment
of other debt obligations; and (ii) are from those states or
union territories that are taking or have agreed to take steps
to reduce stamp duties on real estate transactions and
amend the Rent Control Laws, consistent with the Action
Plan.
The borrower will carry out the Project with due diligence LA, Section Complied with.
and efficiency and in conformity with sound banking, 5.01 (a)
administrative, financial, engineering, environmental,
business, and housing practices.
The borrower will always protect itself against any loss LA, Section 5.02 Complied with.
resulting from changes in the rate of exchange between the
rupee and the currency or currencies in which the
borrower’s outstanding money obligations will have to be
met.
56 Appendix 11
The borrower will maintain records and accounts adequate LA, Section 5.04 Complied with in
to record the progress of the Project and of each qualified regard to retain
housing Proposal and Subproject (including the cost loan portfolio.
thereof) and to reflect in accordance with consistently Compliance with
maintained sound accounting principles, the operations and other loan
financial condition of the borrower. portfolio needs
improvement.
The borrower will furnish to ADB all such reports and LA, Section Partly complied
information as ADB will reasonably request concerning the 5.05 (a) with.
loan and the expenditure of the proceeds and maintenance
of the service thereof; (ii) the project; (iii) the qualified
Enterprises, the qualified housing proposals and
Subprojects, and the sub loans; (iv) the administration,
Operations and financial condition of the borrower; and (v)
any other matters relating to the purposes of the Loan.
Without limiting the generality of the foregoing, the borrower LA, Section Partly complied
will furnish to ADB quarterly reports on the execution of the 5.05 (b) with.
Project and on the operation and management of the
borrower. Such reports will be submitted in such form and
in such detail and within such a period as ADB will
reasonably request, and will indicate, among other things,
progress made and problems encountered during the
quarter under review, steps taken and proposed to be taken
to remedy these problems, and proposed programe of
activities and expected progress during the following
quarter.
Promptly after the closing date for withdrawals from the LA, Section Complied with.
loan account, in any event not later than three months after 5.05 (c)
the said closing date or such later date as may be agreed
for this purpose between ADB and the borrower, the
borrower will prepare and furnish to ADB a report, in such
form and in such detail as ADB will reasonably request, on
the utilization of the loan, the execution of the qualified
housing proposals and subprojects, their costs, the
performance by the borrower of its obligations under this
Loan Agreement and the accomplishment of the purposes
of the loan.
Appendix 11 57
The borrower will have its account and financial statements LA, Section (i) Complied
(balance sheet, statement of income and expenses, and 5.06 (a) with.
related statements) audited annually, in accordance with
appropriate audited standards consistently applied, by (ii) Partially
independent auditors whose qualifications, experience and complied
terms of reference are acceptable to ADB; and will, with .
promptly after their preparation but in any event not later
than 12 months after the close of the financial year to which
they relate, furnish to ADB (i) certified copies of the audited
accounts and financial statements and (ii) the report of the
auditors relating thereto (including the auditors’ opinion on
the use of loan proceeds and compliance with the
covenants of this loan agreements as well as on the use of
procedures for the imprest account and statement of
expenditure, all the English language. The borrower will
furnish to ADB such further information concerning such
accounts and financial statements and the audit thereof as
ADB will from time to time reasonably request.
The borrower will enable ADB’s representatives to inspect LA, Section 5.07 Complied with.
any qualified Enterprise, any qualified housing Proposal
and Subproject, the goods financed out of the proceeds of
the Loan, and any relevant records and documents
maintained by the borrower.
The borrower will, promptly as required, take all action LA, Section Complied with.
within its powers to maintain its corporate existence, to 5.08 (a)
carry on its operations and to acquire, maintain and renew
all rights, properties, powers, privileges and franchises
which are necessary in the carrying out of the project or in
the conduct of its business.
The borrower will at all times conduct its business in LA, Section Complied with.
accordance with sound administrative, financial, 5.08 (b)
environmental, business and housing practices, and under
the supervision of the competent and experienced
management and personnel.
Except as ADB and the borrower may other agree, the LA, Section Complied with.
borrower will not sell, lease or otherwise dispose of any of 5.08 (c)
its assets, except in the ordinary course of its business.
Prior to establishing or acquiring any subsidiary, the LA, Section Complied with.
borrower will inform ADB of any such action. 5.08 (d)
58 Appendix 11
The borrower will keep ADB informed of any material event LA, Section Complied with.
having a substantial and adverse impact on its 5.08 (e)
administrative, financial equity and lending operations,
including decisions resulting from judicial actions and other
forms of litigation.
Except as ADB and the borrower may otherwise agree, the LA, Section 5.09 Complied with.
borrower will maintain a ratio of the consolidated debt of
the borrower to the consolidated equity of the borrower not
higher than 15:1.
Except as ADB may otherwise agree, the borrower will LA, Section 5.10 Complied with.
undertake its operations so as to ensure that the
consolidated internal cash generation for debt service for
each financial year will be at least 1.2 times the
consolidated debt-service requirement for that financial
year.
The borrower undertakes that, except as ADB and the LA, Section Complied with.
borrowers may otherwise agree, (i) if the borrower and any 5.12 (a)
subsidiary create any lien on any of its assets as security
for any debt, such lien will ipso facto equally and ratably
secure the payment of the principal of, and interest and
other charges on, the Loan and the borrower, in creating or
permitting the creation of any such lien, will make express
provision to that effect; and (ii) if any statutory lien will be
created on any assets of the borrower or any subsidiary as
security for any debt, the borrower will grant to ADB an
equivalent lien satisfactory to ADB.