Private sector housing finance

investors against default on loans provided the Housing Development Finance Corporation (HDFC), India"s first private housing finance institution. The project is intended to help establish the HDFC as the nucleus of a nationwide private sector network financially capable of supplementing public housing efforts by providing long-term mortgage financing to all income levels, especially the poor. A total of $30 million in HG funds will be made available to the HDFC in FY"s 1981 and 1982. FY 1981 funds ($20 million) will be used for HDFC programs which help industrial and agricultural companies provide housing assistance as part of an employee compensation package, thus encouraging HDFC efforts to serve the poor. Specifically, HG funds will be used to finance 6,000 housing units for urban and rural families at or below the median income level by providing: (1) direct loans to employees, with their companies guaranteeing the loans; (2) loans to companies for onlending to employees for the purpose of buying a home; and (3) loans to companies to build rental housing for employees. It is expected that participating companies will offer their employees much more favorable terms (e.g., some 6-8% lower) than those paid to the HDFC. The project will enable the HDFC, while fully recovering its costs and generating additional capital, to expand its operations in terms of the numbers of HDFC offices and loans processed and in terms of geographical coverage; the latter will support government policy to decentralize industrial development away from larger cities by using the HDFC to finance worker housing in outlying areas. FY 1982 funds will be authorized after an assessment of first year operations. Beneficiaries (who will continue to be families below the median income level) will probably include individuals seeking home purchase loans through cooperatives; since the HDFC requires a 30% downpayment on individual loans, a smaller number of units may be financed as a result. Development grant funds will be made available to finance short-term advisors, office equipment, and long- and short-term U.S. and short-term in-country training for HDFC staff.