HDFC - The Journey Through Time
 
 2011 marks an important milestone for HDFC as we commemorate the birth
 centenary of our Founder Chairman, H. T. Parekh. Thirty-four years ago,
 H. T. Parekh asked the question, Why cant Indians have a home of
 their own with housing finance in the early years of their lives? HDFC
 was conceived as an answer to his question.
 
 Creating HDFC was not just about having a new idea for India. For H. T.
 Parekh, it was equally important to build an organisation on the
 principles of efficiency, effectiveness, integrity and transparency. He
 also demonstrated that enhancing shareholder value and fulfilling
 social objectives were not conflicting goals.
 
 Over the years, HDFC has continued to abide by the principles and
 objectives set out at inception. Though the economic environment and
 competitive landscape has changed at an unprecedented pace, the work
 culture and value system within HDFC has remained steadfast. Credit for
 this goes to an entire team of extraordinary individuals who have spent
 many long years working at HDFC. For a leader who passes on the baton,
 there is nothing more gratifying than knowing that there is an
 extremely talented and trustworthy team who have a deep sense of
 commitment and belonging to the organisation.
 
 It is important for an organisation to continuously introspect and
 benchmark its performance. HDFC was the only Indian company to be
 included in the fifth annual list of 2011 Worlds Most Ethical
 Companies by Ethisphere Institute, USA. In Finance Asias latest
 annual poll of Asias top companies, HDFC was voted as the best Indian
 company for investor relations and ranked amongst Indias best managed
 companies. These accolades and recognitions give us our moments of
 pride. More importantly, it reassures us that we are doing things right
 by being a principles-based organisation with a strong commitment to
 consistently enhance shareholder value.
 
 As part of the organisations strategic positioning, over the last
 decade HDFC has devoted large resources and management time in sowing
 the seeds to diversify into various financial services – banking, life
 and general insurance, asset management, property funds and education
 loans. The objective has been two fold – capitalising on HDFC as a
 trusted brand name and creating value for our shareholders.
 
 Housing: The Larger Agenda
 
 Housing finance, however, will continue to remain HDFCs core focus
 area. That India faces a huge shortage of dwelling units is well known,
 but the gravity of the situation is fast reaching a critical tipping
 point. Housing continues to remain out of the reach of the common man.
 Growing urbanisation is inevitable – by 2030 it is estimated that 600
 million of Indias population will be living in Indias cities.
 
 Urbanisation will increasingly be at the centre of Indias growth
 trajectory. How will cities absorb a further influx of people? Where
 will new cities emerge? How will cities be financed? The challenges in
 managing Indias urban transformation call for large financial
 resources, a strong urban governance framework and political will to
 push for these changes to happen.
 
 World over, housing the poor has been particularly challenging for all
 governments. It is no wonder that the Harvard Business Review blog
 deservedly received so much attention when Prof. Vijay Govindarajan and
 Christian Sarkar, an independent consultant invited the worlds best
 business thinkers to apply their minds on creating a USD 300 house
 (approximately Rs. 13,500). The objective they said, is to start
 something big, by thinking small. Despite the low price point, the key
 criteria is to design homes built of mass-produced materials which are
 durable to sustain all weather conditions, have access to running
 water, be energy efficient and the model must be scalable.
 
 This is the era of frugal innovation – which is the ability to
 drastically reduce the cost of products, but retain its superior
 quality through redesigning and use of technology.  India has seen
 success in frugal innovation across various sectors - automobile,
 consumer products and telecom. So the question is, why not in housing?
 
 The challenges of providing affordable or low cost housing solutions
 are unique.  There are a number of tangible and intangible inputs
 needed – ranging from slum dweller empowerment, capacity building,
 local governance, urban planning and design, finance, infrastructure,
 property rights and government policies. The need to find solutions is
 becoming increasingly compelling because housing is one of the most
 effective anti-poverty tools. In India, shelter poverty remains
 considerably larger than income poverty. All slum dwellers are not
 poor, but land market distortions have resulted in pushing them away
 from accessing formal housing.
 
 While a USD 300 house in metropolitan cities in India may well be a
 pipe dream, what is more important at this juncture is to recognise
 that affordable or low cost housing is commercially viable, provided
 the enabling environment is conducive. It is encouraging to note that
 there are a handful of new and existing developers who have
 demonstrated this and they must be incentivised to continue
 participating in this segment.
 
 Five Point Doable Housing Agenda
 
 The governments housing agenda is huge and daunting. There is a need
 for a complete overhaul in archaic land laws. The longer we drag our
 feet on the passing of the Land Acquisition Bill, the more detrimental
 it will be in slowing down overall economic development. Urban local
 bodies must be empowered in terms of financial autonomy and they need
 to have the political and administrative will to collect taxes and
 impose user charges. Densification policies for Indian cities have to
 be transparent and consistent. Constant flip-flops on FSI policies have
 resulted in instances where the state government has lost out on huge
 revenues which otherwise could have been collected and redeployed in
 developing city infrastructure. Indian universities need to churn a
 significantly larger number of qualified urban planners and
 specialists.  There is also a need to have policies that encourage
 mass-production techniques for housing and adoption of modern
 construction technologies.
 
 To my mind, there are some solutions that can readily be put in place
 and some that may admittedly take a longer time to effectively
 implement. Clearly, a no action stance cannot do.
 
 Listed below is a five point immediately doable agenda for housing:
 
 1.  Single Ministry to deal with Urbanisation and Housing: The Report
 on Indian Urban Infrastructure and Services rightly calls for a merger
 of the Ministry of Urban Development with the Ministry of Housing and
 Urban Poverty Alleviation.  A holistic framework of urban planning
 cannot happen by segregating housing.  Similar merger of departments
 should be done at the state level as well.
 
 2.  Streamline all existing Government Housing Finance Programmes:
 Currently there are far too many fragmented government housing finance
 schemes. The amounts budgeted for these schemes are miniscule and the
 actual utilisations are even lower. These programmes have little impact
 in terms of the scale of the housing problem. Many of these schemes are
 flawed in design and embedded with too many restrictions. This calls
 for a one-time thorough re-assessment of all existing government
 housing finance programmes.
 
 3.  Special Settlement Commission for ULCRA cases: After over a
 decade of the repeal of the Urban Land Ceiling & Regulation Act
 (ULCRA), there are many properties still in litigation under this Act.
 Court hearings are not happening under the guise of the Act being
 repealed, while the properties still remain locked up in dispute under
 this Act. This situation may well drag on for years. A special
 Settlement Commission should be constituted to resolve disputed land
 cases under this Act. This will free up properties that have otherwise
 been kept out of the supply of developable urban space.
 
 4.  Incentives for Affordable Housing Projects: If an affordable
 housing project has to go through the same rigours as other development
 projects with multiple approvals from various authorities and face the
 same delays and cost overruns, what incentive is there for a developer
 to participate in this segment? It makes imminent sense to have a
 single window approval mechanism for affordable housing projects where
 the per unit cost is under Rs. 10 to 15 lakhs. A time bound, fast-track
 approval process is clearly a preferable option over lobbying for tax
 sops.
 
 5.  Compulsory implementation of E-Auction for Land Transactions: In
 the absence of a transparent mechanism to sell land, several government
 entities such as the railways, defence and public sector units are
 hesitant to dispose land. An e-auction mechanism will leave no space
 for discretion and arbitrary dealings.  This will allow entities to
 unlock value from land as well as pave the way for a more transparent
 system of acquiring land.
 
 These baby steps will go a long way in alleviating the housing problems
 in India.  More homes translate into healthier and better educated
 individuals and communities with greater security and well being. We
 all have our small roles to play and HDFC continues to stand fully
 committed to the cause of housing more Indians.