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									                                              PCR: IND 30011
ASIAN DEVELOPMENT BANK




            PROJECT COMPLETION REPORT


                         ON THE

                 Housing Finance Project
         (Loans 1549-IND, 1550-IND, and 1551-IND)



                            IN


                          INDIA




                        August 2003
                                   CURRENCY EQUIVALENTS
                                  Currency Unit – rupee/s (Re/Rs)

                                  At Appraisal            At Project Completion
                                  20 August 1997          26 January 2001
             Re1.00        =      $0.028                  $0.21
              $1.00        =      Rs35.7                  Rs46.4

                                          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.

(ii)   In this report, “$” refers to US dollars.
                                       CONTENTS
                                                                         Page
BASIC DATA                                                                iii

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

IV.    ASSESSMENT AND RECOMMENDATIONS                                    11
       A.   Relevance                                                    11
       B.   Efficacy in Achievement of Purpose                           12
       C.   Efficiency in Achievement of Outputs and Purpose             12
       D.   Preliminary Assessment of Sustainability                     12
       E.   Other Impacts                                                13
       F.   Overall Assessment                                           13
       G.   Lessons Learned                                              13
       H.   Recommendations                                              14

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

      3. Date of Board Approval                  25 September 1997

      4. Date of Loan Agreement                  6 November 1997

      5. Date of Loan Effectiveness

           -   In Loan Agreement                 4 February 1998
           -   Actual
                - NHB                            12 December 1997
                - HUDCO                          11 December 1997
                - HDFC                           11 December 1997
           -   Number of Extensions              None
(iv)


       6. Terminal Date for Commitments
           - In Loan Agreement
              - NHB                               11 December 2000
              - HUDCO                             10 December 2000
              - HDFC                              10 December 2000

            - Actual
              - NHB                               26 December 2002
              - HUDCO                             27 December 2002
              - HDFC                              22 November 2002

            - Number of Extensions                One each

       7. Closing Date
             - In Loan Agreement                  30 June 2003
             - Revised                            None
             - Number of Extensions               None

       8. Terms to the Borrower
             - Interest Rate                      Market-based loan with a spread of 40
                                                  basis points
                 - Maturity                       25 years
                 - Grace Period                   5 years
                 - Repayment Terms                Payable in 40 semiannual installments
                                                  commencing December 2002

       9.   Terms of Relending (if any)           Not stipulated

       10. Interest Rate for Subloans             Market-based rates acceptable to the
                                                  Asian Development Bank
       11. Disbursements

            a.     Dates

                           Initial Disbursement   Final Disbursement      Time Interval

             NHB            31 December 1997          23 December 1999       24 months
             HUDCO          31 December 1997           6 December 1999       24 months
             HDFC           24 December 1997            26 January 2001      37 months

                              Effective Date      Original Closing Date    Time Interval

             NHB            12 December 1997               30 June 2003      66 months
             HUDCO          11 December 1997               30 June 2003      66 months
             HDFC           11 December 1997               30 June 2003      66 months
                                                                                        (v)


      b.        Amount ($ million)

                                                         Last           Net         Undis-
                                      Original         Revised        Amount        bursed
          Category                    Allocation      Allocation     Disbursed      Balance
        1. Project
           Expenditure                      300.00          300.00       300.00     0.00
        2. Imprest Account                    0.00            0.00         0.00     0.00
           Total                            300.00          300.00       300.00     0.00

C.    Implementation Data

      1.        Number of Subloans                   300

      2.        Distribution of Subloans by Component

                                                     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

      NGO = non government organizations, CFI = community-based finance institutions.
(vi)


          3.      Project Performance Report Ratings

                                                                                     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

D.        Data on Asian Development Bank Missions

        Name of                         Date                    No. of       No. of           Specialization
        Mission                                                Persons      Person-            of Membersa
                                                                             Days
    Fact-finding        22 Apr–7 May 1999                         8           112         h, g, c, I, b, i, o
    Appraisal           17–31 Jul 1997                            5            75         h,g,j,I,n
    Inception           19–29 Jan 1998                            4            44         h,I,k
    Project Review 1    12–22 Oct 1998                            2            22         b,I
    Project Review 2    1 Dec 1999–23 Feb 2000                    2                       I,g
    Disbursement        6–18 Mar and 4–5 Apr 2000                 2             30        f,I
    Review 1
    Disbursement        24 Jul–10 Aug 2000                        2             36        f,g
    Review 2
    Disbursement        10–16 Jan 2001                            2             16        f,I
    Review 3
    Disbursement        26 Feb–10 Mar 2001                        2             18        f,l
    Review 4
    Disbursement        3,11–12 Apr 2001                          1             3         f
    Review 5
    Disbursement        23–25 May 2001                            1             3         f
    Review 6
    Audit Review 1      4 Jun–8 Aug 2001                          2             78        I, m
    Disbursement        27 Jun–9 Jul                              3             27        f, b,g
    Review 7
a
    a-engineer, b-financial analyst, c-counsel, d-economist, e-procurement/consultant specialist, f-control
    officer, g-programs officer, h-environment specialist, i-staff consultant, j-urban development specialist,
    k-Assistant operations analyst, l-staff consultant, m-auditor, o-resident representative, India Resident
    Mission.
b
    This Project Completion Report was prepared by M. Ravi, Financial Officer; Tanuka Endow,
    Consultant; and assisted by Michael Gomes, Senior Administrative Assistant, India Resident Mission.
                                          I.       BACKGROUND
A.       History
1.      The National Housing Bank (NHB) was established in July 1988 as the apex body for the
housing finance sector. NHB is wholly owned by the Reserve Bank of India (RBI), the central
bank. NHB's three primary responsibilities are to (i) mobilize resources for the housing sector,
(ii) promote the development of housing finance companies (HFCs), and (iii) regulate their
operations.
2.      The Housing and Urban Development Corporation Ltd. (HUDCO) was incorporated in
April 1970 as a wholly government-owned company to promote housing and urban
development, particularly for low-income and economically weaker sectors.            HUDCO is
registered under the Companies Act as a public limited company and managed by a
government-appointed board of directors. HUDCO’s operations are divided between housing
and infrastructure finance, mainly through state and local agencies, with some direct assistance
to individuals under the HUDCO Niwas scheme besides assistance to some privately sponsored
projects. HUDCO is mandated to lend at least 55% of its funds to low-income and economically
weak sectors.
3.     The Housing Development Finance Corporation Ltd. (HDFC) was established in 1977 as
a public limited company to provide housing finance to individuals. As the first private HFC, its
operations grew rapidly and it continues to be the market leader in the retail housing finance
sector despite the emergence of a number of HFCs.1
B.       Scope of Operations
4.       As a housing finance promoter, NHB financially supports HFCs and facilitates access to
institutional credit. NHB provides refinancing to 31 HFCs, commercial banks, and cooperative
sector housing finance institutions (HFIs). The bulk of NHB’s assistance is in the form of
refinance to eligible primary HFIs in the public, private, and cooperative credit sector. As a
housing finance regulator, NHB sets prudential norms for capital adequacy ratio (CAR), income
recognition, asset classification, and provisioning on HFCs’ nonperforming assets. In January
1999 the NHB board approved a new refinancing scheme for community-based financial
institutions (CFIs) under which any approved institution, mainly HFCs, can avail themselves of
refinance for loans made to CFls. To augment sector resources, NHB has issued a number of
mortgage-backed securities (MBS). In collaboration with Canada Mortgage Housing
Corporation, NHB promoted a mortgage credit guarantee company for which the Asian
Development Bank (ADB) has approved equity assistance.2
5.      HUDCO provides credit for housing and infrastructure development through government
and privately sponsored projects; develops and disseminates low-cost and eco-friendly
construction technology; builds capacity in the sector through training, research, and
consultancy; helps implement housing and urban infrastructure projects secured by state
government guarantees; and assists privately sponsored projects. With the emphasis on fiscal
reforms in the recent years, the ability of the states to provide guarantees has been constrained,
thus limiting state-guaranteed assistance by HUDCO. Its direct lending window to individuals is
a recent response to these changes.
6.     HDFC has promoted home ownership by providing finance through a wide variety of
products. Besides giving direct loans to individuals, which account for most loans (73% by
FY2002), HDFC has also added to housing stocks through loans to corporations and state

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


agencies. Its associates include property management, credit-rating, consumer finance,
infrastructure finance services, asset management, insurance, and commercial banking
companies.
C.       Relationship with ADB and Other Lenders
7.       The Project was the first loan to HUDCO and NHB. ADB had provided a loan of $20
million to HDFC under the Karnataka Urban Infrastructure Development Project,3 which targeted
lending for low-income housing and slum improvement. ADB has supported technical
assistance (TA) for capacity building4. In October 2001 ADB also approved TA to assess the
role of MBS5.

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

B.      Efficacy in Achievement of Purpose
48.     The Project was reasonably successful in improving access to housing finance by the
poor, to whom 62% of ADB funds, against the target of 50%, were channeled. Slum-upgradation
subprojects were undertaken through traditional government channels and did not meet project
expectations of an innovative participative approach involving nongovernment CFIs/NGOs . The
Project was also unsuccessful in integrating informal channels into the mainstream financial
system.
49.      The Project provided finance to more than 219,449 households and 191,700 LIHs. As
lending through the cooperative finance system was concentrated mainly in a few states, the
Project achieved limited success in expanding the national cooperative system. With the
changing financial architecture and move away from directed to commercial lending, financial
institutions are expected to develop new equations and relationships with the various
participants/stakeholders and informal players such as CFIs. Microfinance institutions are
expected to have their own niche, and their role is expected to evolve, if slowly.
C.      Efficiency in Achievement of Outputs and Purpose
50.     The Project helped create close to the envisaged number of dwelling units, resulting in
significant leveraging of funds from the beneficiaries. Various ADB initiatives (para. 7) to
develop alternative sustainable sources of funds, together with this Project and the Housing
Finance II Project, have helped expand the mortgage market and introduce MBS. ADB has
catalyzed reforms to create quality mortgages and increase the supply of dwelling units.
D.      Preliminary Assessment of Sustainability
51.    The Project adopted multiple channels to expand the housing finance sector. The loan to
NHB was channeled through HFCs and the cooperative system. HFCs are commercially
oriented organizations regulated by NHB and have adequately recovered the cost of their
mortgages. The cooperative finance system, however, is weak in recovery and has poor
accounting practices, with considerable backlog in accounts finalization and audit. One
important development during recent years is the increasing role of commercial banks in
mortgage finance. Another is the slow change in NHB’s refinance composition, with increasing
assistance to commercial banks and HFCs rather than cooperative organizations. NHB has
been redefining modes of credit expansion by playing a greater role in MBS issues as an
advisor and investor. Adapting to market changes will make NHB sustainable in the medium
term.
52.      HUDCO has been the principal channel to support government-sponsored programs.
Government-sponsored schemes, particularly for the poor, suffer from inadequate cost recovery
and are administered through the cooperative finance system or state government outfits/local
authority. Such schemes are target driven, and the agencies traditionally have not been lending
commercially. As long as state government finances are healthy and budgetary provisions
adequate to meet costs, these programs can be sustainable. With economic reforms and recent
financial sector liberalization, state governments are moving gradually to contain their fiscal
deficit, limiting their ability to guarantee state-sponsored programs. In FY2000 HUDCO started
to change its loan asset portfolio by opening a retail-lending window, and is now limiting its

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)

                       Component                                    NHB                      HUDCO             HDFC                Total
                                                                      Achieve-                   Achieve-          Achieve-           Achieve-
                                                             Estimate   ment            Estimate  ment    Estimate  ment    Estimate     ment

Part A: Lending for Housing to Community-
Based Finance Institutions, Housing Finance
Institutions, Companies, and Households
      Lending through Government Cooperatives                     40.00        43.56         25.00       35.28        10.00       12.76        75.00          91.60
      Lending through NGOs and CFIs                                5.00          0.00         5.00        1.68        10.00        0.00        20.00           1.68
      Lending through                                             55.00        56.44         45.00       56.24        65.00       87.24       165.00         199.92
          - Companies                                         0.00          0.00         0.00         0.00        0.00          32.75      0.00           32.75
          - Corporations and Municipalities                   0.00          0.00         0.00         56.24       0.00          16.77      0.00           73.01
          - HFCs                                              55.00         56.44        0.00         0.00        0.00          0.00       0.00           56.44
          - Directly to Households                            0.00          0.00         0.00         0.00        0.00          37.72      0.00           37.72
      Subtotal (Part A)                                         100.00       100.00         75.00       93.20        85.00      100.00       260.00         293.20
Part B: Lending for Slum Improvement and Low-
Income Housing Subprojects                                         0.00         0.00        25.00        0.00         15.00       0.00         40.00          6.80
      Slum Improvement, of which :                                 0.00         0.00
          - Slum Networking                                        0.00         0.00         0.00        6.78          0.00       0.00          0.00          0.00
          - Workshed-cum-Shelter                                   0.00         0.00         0.00        0.02          0.00       0.00          0.00          0.00
          - Enhanced Productivity-cum-Shelter                      0.00         0.00         0.00        0.00          0.00       0.00          0.00          0.00
      Subtotal (Part B)                                            0.00         0.00        25.00        6.80         15.00       0.00         40.00          6.80
Part C: Expanding the National Housing Finance




                                                                                                                                                                      Appendix 1
System                                                                            To be carried out by NHB from its own resouces

                           Total                                100.00       100.00        100.00      100.00       100.00      100.00       300.00        300.00

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



                                                      Major Recipients of ADB-HF1 Loan

                                35.00   30.53
                                30.00
                                                       24.82
                                25.00

                                20.00
                            %




                                15.00                                       10.96              9.70           9.19
                                10.00

                                 5.00

                                 0.00
                                        Tamilnadu          Kerala           Maharashtra        Gujarat     Andhra Pradesh

                                                                             State




                    Source: Borrower's progress reports.
18   Appendix 1


                                                 LOAN UTILIZATION
                                     Table A1.4: Disbursement of Loans by State

      Loan No. 1549-IND to NHB
      (Cooperative schemes only)


                                        Major Recipient States of Loan 1549

               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


      Loan No. 1550-IND to HUDCO

                                          Major Recipients of Loan 1550
                                                                          33.16
             35.00
             30.00
             25.00                                                                         20.94
             20.00
         %




                             14.82               15.20
             15.00
             10.00
              5.00
              0.00
                         Andhra Pradesh         Gujarat                   Kerala         Tamil Nadu
                                                            State


      Loan No. 1551-IND to HDFC
      (for state cooperatives, state governments, corporations, state governments, and
      private sector, accounting for 62.4% of the total funds disbursed)


                                          Major Recipients of Loan 1551

             50.00                                                                                 46.10

             40.00
             30.00
         %




             20.00            12.75                                            12.54
                                                    9.27
             10.00
               0.00
                            Karnataka         Madhya Pradesh                 Rajasthan       Tamil Nadu
                                                                  State

      Source: Borrowers' progress reports.
                                                                                        Appendix 2           19

                      Table A2.1: Loan No. 1549-IND: Housing Finance Project – NHB
                                           (details of subloans)

                                                                          $ million
Serial               Name of the Subborrower                  Rs million Equivalent        Component

  1      AB Homes                                                3.300       0.083    Housing finance institutions
  2      BOB Housing                                             5.413       0.135    Housing finance institutions
  3      AB Homes                                                1.960       0.049    Housing finance institutions
  4      AB Homes                                                2.839       0.071    Housing finance institutions
  5      Housing Development Finance Corporation                 6.965       0.174    Housing finance institutions
  6      Housing Development Finance Corporation               100.155       2.504    Housing finance institutions
  7      AB Homes                                                1.860       0.047    Housing finance institutions
  8      Cent Bank Homes                                         1.860       0.047    Housing finance institutions
  9      Karnataka Agricultural & Rural Development Board       57.400       1.435    Cooperative schemes
 10      AB Homes                                                2.470       0.062    Housing finance institutions
 11      Global                                                  0.880       0.022    Housing finance institutions
 12      Karnataka Agricultural & Rural Development Board        1.490       0.037    Cooperative schemes
 13      Vysya Bank HFI                                         16.600       0.415    Housing finance institutions
 14      West Bengal Agricultural & Rural Development Board      7.070       0.177    Cooperative schemes
 15      AB Homes                                                2.260       0.057    Housing finance institutions
 16      BOB Housing                                            50.040       1.251    Housing finance institutions
 17      Housing Development Finance Corporation                17.366       0.434    Housing finance institutions
 18      AB Homes                                               75.330       1.883    Housing finance institutions
 19      BOB Housing                                            41.250       1.031    Housing finance institutions
 20      LIC Housing                                             8.173       0.204    Housing finance institutions
 21      Can Fin Homes                                          17.000       0.425    Housing finance institutions
 22      BOB Housing                                            12.730       0.318    Housing finance institutions
 23      Hometrust                                             115.540       2.889    Housing finance institutions
 24      Vijaya Bank Housing                                    23.170       0.579    Housing finance institutions
 25      Hometrust                                              14.102       0.353    Housing finance institutions
 26      Housing Development Finance Corporation                49.937       1.248    Housing finance institutions
 27      Kerala Agricultural and Rural Development Bank         192.824      4.723    Cooperative schemes
 28      Gujarat Lease Financing Ltd.                             77.39      1.833    Housing finance institutions
 29      Tamil Nadu Apex Cooperative                           124.370       2.946    Cooperative schemes
 30      LIC Housing                                            28.293       0.670    Housing finance institutions
 31      Dewan Homes                                            15.680       0.371    Housing finance institutions
 32      BOB Housing                                             5.555       0.132    Housing finance institutions
 33      Vijaya Bank Housing                                     0.428       0.010    Housing finance institutions
 34      Kerala Agricultural and Rural Development Bank        278.576       6.600    Cooperative schemes
 35      Dewan Homes                                             2.940       0.070    Housing finance institutions
 36      BOB Housing                                             7.045       0.167    Housing finance institutions
 37      Global                                                  3.068       0.073    Housing finance institutions
 38      Cent Bank Homes                                        10.592       0.251    Housing finance institutions
 39      Vijaya Bank Housing                                     0.180       0.004    Housing finance institutions
 40      PNB Housing                                            38.240       0.906    Housing finance institutions
 41      AB Homes                                               17.668       0.419    Housing finance institutions
 42      Gujarat Lease Financing Ltd.                           22.291       0.528    Housing finance institutions
 43      BOB Housing                                             4.465       0.106    Housing finance institutions
 20       Appendix 2

                                                                           $ million
 Serial                 Name of the Subborrower                Rs million Equivalent        Component

   44       Vijaya Bank Housing                                   0.160       0.004    Housing finance institutions
   45       Dewan Homes                                          56.993       1.350    Housing finance institutions
   46       Gruh                                                 33.948       0.804    Housing finance institutions
   47       Hometrust                                            10.230       0.242    Housing finance institutions
   48       Housing and Urban Development Corporation          153.600        3.639    Housing finance institutions
   49       AB Homes                                             12.400       0.294    Housing finance institutions
   50        Can Fin Homes                                       17.599       0.417    Housing finance institutions
   51       BOB Housing                                           7.006       0.166    Housing finance institutions
   52       Tamil Nadu Apex Cooperative                          79.667       1.887    Cooperative schemes
   53       Kerala Agricultural and Rural Development Bank     270.489        6.347    Cooperative schemes
   54       AB Homes                                              8.647       0.199    Housing finance institutions
   55       BOB Housing                                          14.684       0.338    Housing finance institutions
   56       BOB Housing                                          11.841       0.272    Housing finance institutions
   57       BOB Housing                                           8.981       0.206    Housing finance institutions
   58       Can Fin Homes                                         4.396       0.101    Housing finance institutions
   59       Can Fin Homes                                      118.350        2.721    Housing finance institutions
   60       Dewan Homes                                        115.080        2.646    Housing finance institutions
   61       Gujarat Lease Financing Ltd.                          6.625       0.152    Housing finance institutions
   62       Gujarat Lease Financing Ltd.                          6.917       0.159    Housing finance institutions
   63       Gujarat Lease Financing Ltd.                         10.663       0.245    Housing finance institutions
   64       Gruh                                                 27.977       0.643    Housing finance institutions
   65       Hometrust                                             1.255       0.029    Housing finance institutions
   66       Hometrust                                             7.501       0.172    Housing finance institutions
   67       Housing and Urban Development Corporation - KSHB   210.000        4.828    Housing finance institutions
   68       Kerala Agricultural and Rural Development Bank     184.980        4.252    Cooperative schemes
   69       Kerala Agricultural and Rural Development Bank       30.950       0.711    Cooperative schemes
   70       Kerala Agricultural and Rural Development Bank       78.780       1.811    Cooperative schemes
   71       Kerala Agricultural and Rural Development Bank        0.953       0.022    Cooperative schemes
   72       LIC Housing                                          94.508       2.173    Housing finance institutions
   73       PNB Housing                                          54.860       1.261    Housing finance institutions
   74       PNB Housing                                          79.390       1.825    Housing finance institutions
   75       PNB Housing                                          84.880       1.951    Housing finance institutions
   76       PNB Housing                                          98.930       2.274    Housing finance institutions
   77       PNB Housing                                        107.340        2.468    Housing finance institutions
   78       PNB Housing                                        211.430        4.860    Housing finance institutions
   79       Tamil Nadu Apex Cooperative                        124.367        2.859    Cooperative schemes
   80       Tamil Nadu Apex Cooperative                        143.862        3.307    Cooperative schemes
   81       Tamil Nadu Apex Cooperative                           3.552       0.082    Cooperative schemes
   82       Tamil Nadu Apex Cooperative                        295.966        6.804    Cooperative schemes
   83       Vijaya Bank Housing                                   0.155       0.004    Housing finance institutions
   84       Vijaya Bank Housing                                   1.233       0.028    Housing finance institutions
   85       Vijaya Bank Housing                                   1.280       0.029    Housing finance institutions
   86       Vijaya Bank Housing                                   1.270       0.029    Housing finance institutions
  Total                                                        4,260.46      100.35

Average rate of exchange: Rs42.605 = $1
Source: National Housing Bank.
                                                                                                               Appendix 2             21

                                   Table A2.2: Loan No. 1550-IND: Housing Finance Project – HUDCO
                                                         (details of subloans)

                                                                                         $ 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

   52     Karnataka Slum Clearance Board       Karnataka              2.69         0.06   Slum improvement
   53     Karnataka Slum Clearance Board       Karnataka              3.11         0.07   Slum improvement
   54     Karnataka Slum Clearance Board       Karnataka              1.81         0.04   Slum improvement
   55     Karnataka Slum Clearance Board       Karnataka              2.95         0.07   Slum improvement
   56     KHB                                  Karnataka             40.37         0.96   Slum improvement
   57     KSHB                                 Kerala                21.42         0.51   Housing board and local bodies
   58     KSHB                                 Kerala                 6.72         0.16   Housing board and local bodies
   59     KSHB                                 Kerala                24.60         0.58   Housing board and local bodies
   60     KSHB                                 Kerala                24.60         0.58   Housing board and local bodies
   61     KSHB                                 Kerala                24.60         0.58   Housing board and local bodies
   62     KSHB                                 Kerala                30.00         0.71   Housing board and local bodies
   63     KSHB                                 Kerala                30.00         0.71   Housing board and local bodies
   64     KSHB                                 Kerala                29.75         0.70   Housing board and local bodies
   65     KSHB                                 Kerala                29.75         0.70   Housing board and local bodies
   66     KSHB                                 Kerala                29.75         0.70   Housing board and local bodies
   67     Housefed                             Kerala                70.74         1.67   Cooperative schemes
   68     Santhigiri Ashram                    Kerala                 0.73         0.02   Nongovernment organizations
   69     SIDA, Kottapally                     Kerala                 7.00         0.17   Nongovernment organizations
   70     KSHB                                 Kerala                15.93         0.38   Housing board and local bodies
   71     KSHB                                 Kerala                16.57         0.39   Nongovernment organizations
   72     KSHB                                 Kerala                15.00         0.35   Nongovernment organizations
   73     Housefed                             Kerala                29.58         0.70   Cooperative schemes
   74     Housefed                             Kerala                78.60         1.86   Housing board and local bodies
   75     Housefed                             Kerala                80.01         1.89   Housing board and local bodies
   76     Housefed                             Kerala                80.01         1.89   Cooperative schemes
   77     KSHB                                 Kerala                25.38         0.60   Housing board and local bodies
   78     KSHB                                 Kerala                 6.95         0.16   Housing board and local bodies
   79     KSHB                                 Kerala                11.60         0.27   Housing board and local bodies
   80     KSHB                                 Kerala                11.60         0.27   Housing board and local bodies
   81     KSHB                                 Kerala                11.60         0.27   Housing board and local bodies
   82     Housefed                             Kerala                26.08         0.62   Cooperative schemes
   83     Housefed                             Kerala                30.00         0.71   Cooperative schemes
   84     Housefed                             Kerala               170.00         4.02   Cooperative schemes
   85     Vandanmedu Development Society       Kerala                 7.00         0.17   Nongovernment organizations
   86     Vandanmedu Development Society       Kerala                 1.20         0.03   Nongovernment organizations
   87     Vandanmedu Development Society       Kerala                 2.50         0.06   Nongovernment organizations
   88     SIDA                                 Kerala                12.50         0.30   Nongovernment organizations
   89     KSHB                                 Kerala                19.76         0.47   Housing board and local bodies
   90     Housefed                             Kerala                72.15         1.71   Cooperative schemes
   91     Housefed                             Kerala                86.74         2.05   Cooperative schemes
   92     Housefed                             Kerala                86.95         2.06   Cooperative schemes
   93     KSHB                                 Kerala                25.26         0.60   Housing board and local bodies
   94     KSHB                                 Kerala                25.26         0.60   Housing board and local bodies
   95     KSHB                                 Kerala                25.26         0.60   Housing board and local bodies
   96     KSHB                                 Kerala                25.26         0.60   Housing board and local bodies
   97     KSHB                                 Kerala                25.26         0.60   Housing board and local bodies
   98     KSHB                                 Kerala                25.26         0.60   Housing board and local bodies
   99     COSTFORD                             Kerala                12.50         0.30   Nongovernment organizations
  100     KSHB                                 Kerala                25.26         0.60   Housing board and local bodies
  101     KSHB                                 Kerala                25.26         0.60   Housing board and local bodies
  102     Special Area Development Authority   Madhya Pradesh         2.43         0.06   Housing board and local bodies
  103     Jabalpur Development Authority       Madhya Pradesh        14.70         0.35   Housing board and local bodies
  104     Special Area Development Authority   Madhya Pradesh         8.89         0.21   Housing board and local bodies
  105     MRSPBM                               Madhya Pradesh        30.00         0.71   Cooperative schemes
  106     MPHB                                 Madhya Pradesh        15.40         0.36   Housing board and local bodies
  107     MPHB                                 Madhya Pradesh         3.33         0.08   Housing board and local bodies
                                                                                                     Appendix 2              23

                                                                                $ Million
Serial    Subborrower                                    State    Rs million   Equivalent   Component

  108    SPARC-Suryodaya Coop Society               Maharashtra         1.40         0.03   Nongovernment organizations
  109    NIT, Nagpur                                Maharashtra        43.85         1.04   Housing board and local bodies
  110    JMC, Jalgaon                               Maharashtra        36.92         0.87   Slum improvement
  111    JMC, Jalgaon                               Maharashtra        52.69         1.25   Slum improvement
  112    JMC, Jalgaon                               Maharashtra        35.77         0.85   Slum improvement
  113    CHIL CHIL Asian Mission Society            Manipur             0.74         0.02   Nongovernment organizations
  114    Artisans Alliance Jawaja, Rajasthan        Rajasthan           1.15         0.03   Nongovernment organizations
  115    Rajasthan HB                               Rajasthan           9.18         0.22   Housing board and local bodies
  116    Rajasthan HB                               Rajasthan          19.20         0.45   Housing board and local bodies
  117    Urban Improvement Trust, Ajmer             Rajasthan           3.50         0.08   Housing board and local bodies
  118    Rajasthan HB                               Rajasthan          11.49         0.27   Housing board and local bodies
  119    Rajasthan HB                               Rajasthan          25.69         0.61   Housing board and local bodies
  120    Rajasthan HB                               Rajasthan           6.31         0.15   Housing board and local bodies
  121    Rajasthan HB                               Rajasthan           4.88         0.12   Housing board and local bodies
  122    TNCHF - Madurai, Mannar, Thirumalai        Tamil Nadu         13.50         0.32   Cooperative schemes
  123    TNCHF - Madurai, Mannar, Thirumalai        Tamil Nadu         15.68         0.37   Cooperative schemes
  124    TNCHF - Madurai, Mannar, Thirumalai        Tamil Nadu         15.68         0.37   Cooperative schemes
  125    TNCHF - Mannar, Thirumalai, Rammd          Tamil Nadu         30.34         0.72   Cooperative schemes
  126    Tamil Nadu Handloom Weavers Coop Society   Tamil Nadu          0.84         0.02   Workshed cum housing
  127    Tamil Nadu Slum Clearance Board            Tamil Nadu         14.70         0.35   Slum improvement
  128    TNCHF - Arcot, Ramaswamy                   Tamil Nadu          1.55         0.04   Cooperative schemes
  129    TNCHF - Theeran                            Tamil Nadu          1.79         0.04   Cooperative schemes
  130    TNCHF - Mannar                             Tamil Nadu          3.00         0.07   Cooperative schemes
  131    TNCHF - Coimbatore                         Tamil Nadu          3.00         0.07   Cooperative schemes
  132    Tamil Nadu HB                              Tamil Nadu         12.70         0.30   Housing board and local bodies
  133    TNCHF - Mannar                             Tamil Nadu         12.84         0.30   Cooperative schemes
  134    TNCHF - Kamarajar                          Tamil Nadu         12.84         0.30   Cooperative schemes
  135    TNCHF - Chidambarnar                       Tamil Nadu         12.16         0.29   Cooperative schemes
  136    TNCHF - Coimbatore                         Tamil Nadu          8.66         0.20   Cooperative schemes
  137    TNCHF - Ambedkar                           Tamil Nadu         12.84         0.30   Cooperative schemes
  138    TNCHF - Dharampuri                         Tamil Nadu         12.84         0.30   Cooperative schemes
  139    TNCHF - Rajaji                             Tamil Nadu         12.84         0.30   Cooperative schemes
  140    Tamil Nadu Slum Clearance Board            Tamil Nadu         17.71         0.42   Slum improvement
  141    Tamil Nadu Slum Clearance Board            Tamil Nadu          9.32         0.22   Slum improvement
  142    Tamil Nadu Slum Clearance Board            Tamil Nadu         10.01         0.24   Slum improvement
  143    TNCHF - Thanjavar                          Tamil Nadu         12.82         0.30   Cooperative schemes
  144    TNCHF - Theeran                            Tamil Nadu         12.82         0.30   Cooperative schemes
  145    TNCHF - Pudukottai                         Tamil Nadu         12.82         0.30   Cooperative schemes
  146    TNCHF - Madurai                            Tamil Nadu         12.89         0.30   Cooperative schemes
  147    TNCHF - Mannar, Thirumalai                 Tamil Nadu         12.82         0.30   Cooperative schemes
  148    TNCHF - Kamrajar Ph IV                     Tamil Nadu          8.06         0.19   Cooperative schemes
  149    TNCHF - N. Arcot Ambedkar                  Tamil Nadu         10.62         0.25   Cooperative schemes
  150    TNCHF - Periyar                            Tamil Nadu         11.94         0.28   Cooperative schemes
  151    TNCHF - Thiruchi                           Tamil Nadu          2.29         0.05   Cooperative schemes
  152    TNCHF - Tirunelveli                        Tamil Nadu          8.60         0.20   Cooperative schemes
  153    Palmyrah Workers Dev. Society              Tamil Nadu          3.00         0.07   Nongovernment organizations
  154    Tamil Nadu Slum Clearance Board            Tamil Nadu         16.80         0.40   Slum improvement
  155    Tamil Nadu Slum Clearance Board            Tamil Nadu          8.40         0.20   Slum improvement
  156    Tamil Nadu Slum Clearance Board            Tamil Nadu         36.31         0.86   Slum improvement
  157    TNCHF - Kamarajar                          Tamil Nadu         10.40         0.25   Cooperative schemes
  158    TNCHF - Kanyakumari                        Tamil Nadu          3.08         0.07   Cooperative schemes
  159    Tamil Nadu Slum Clearance Board            Tamil Nadu         14.00         0.33   Slum improvement
  160    Tamil Nadu Slum Clearance Board            Tamil Nadu          3.13         0.07   Slum improvement
  162    CEDMA, Chennai                             Tamil Nadu          2.50         0.06   Nongovernment organizations
  163    TNCHF - Ramanathapuram                     Tamil Nadu         11.55         0.27   Cooperative schemes
  164    TNCHF - Madurai                            Tamil Nadu         14.63         0.35   Cooperative schemes
24       Appendix 2

                                                                                         $ 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

        1.     Under the Project, NHB’s targets for lending are:

               (i)     $40 million through cooperatives (part A),
               (ii)    $5 million through CFIs/NGOs (part A),
               (iii)   $55 million through refinancing HFIs (part A), and
               (iv)    NHB will provide $13 million as counterpart funds for equity
                       participation in HFCs.

        2.      The existing channels for lending by NHB are as follows:

               (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

        1.     Under the Project, HUDCO’s targets for lending are:

               (i)     $25 million through cooperatives (part A),
               (ii)    $5 million through CFIs/NGOs (part A),
               (iii)   $45 million through companies and municipalities (part A), and
               (iv)    $25 million for slum-improvement projects and low-income housing
                       projects (part B).

        2.      The existing channels for lending by HUDCO are as follows:

               (i)     HUDCO lends to State Cooperative Housing finance societies and
                       cooperative banks. They in turn on-lend to primary housing
                       cooperatives. The latter institutions then on-lend to households,
               (ii)    HUDCO lends to CFIs and NGOs. The latter in turn on-lend to
                       households,
               (iii)   HUDCO lends to corporations and municipalities who on-lend directly
                       to households, and
               (iv)    HUDCO lends to state or municipal bodies for funding Government
                       projects for low-income housing and slum improvement.
                                                                             Appendix 3       27


C.      HDFC

        1.       Under the Project, HDFC’s targets for lending are:

                 (i)      $10 million through cooperatives (part A),
                 (ii)     $10 million through CFIs/NGOs (part A),
                 (iii)    $65 million directly to households (part A), and
                 (iv)     $15 million for slum-improvement projects and low-income housing
                          projects (part B).

        2.       The existing channels for lending by HDFC are as follows:

                 (i)      HDFC lends to State Cooperative HF societies. They in turn on-lend
                          to primary housing cooperatives. The latter institutions then on-lend to
                          households,
                 (ii)     HDFC lends to CFIs and NGOs. The latter in turn on-lend to
                          households,
                 (iii)    HDFC lends to private companies/municipal corporations who on-lend
                          to households, and
                 (iv)     HDFC lends directly to households.




Source: Borrowers’ reports.
28     Appendix 4



               CHRONOLOGY OF MAIN EVENTS IN PROJECT ADMINISTRATION

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


6 Dec          $50 million disbursed to HUDCO as reimbursement totaling $100 million
               utilization, and the closing date for the loan.
15 Dec         Disbursement of $50 million to NHB as reimbursement.
23 Dec         Liquidation of $30 million by NHB, and closing of the NHB loan.

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



                Table A5: Projected and Actual Disbursement of Loan Proceeds
                                          ($ million)


DFI         Calendar Year         Projected          Cumulative     Actual       Cumulative



NHB               1997                         -              -          20.00             20.00
                  1998                       25.00          25.00        30.00             50.00
                  1999                       35.00          60.00        50.00            100.00



HDFC              1997                         -              -          20.00             20.00
                  1998                       20.00          20.00        30.00             50.00
                  1999                       50.00          70.00        50.00            100.00


HUDCO             1997                         -              -          20.00             20.00
                  1998                       15.00          15.00        40.00             60.00
                  1999                       25.00          40.00        40.00            100.00

Source: Loan Financial Information System.
                                                                                                                                         32
                                                                                                                                         Appendix 6
                                                         ORGANIZATION STRUCTUES
                                          Table A6.1: Organization Structure of National Housing Bank

                                                    Chairman and Managing Director




                          Executive Director                                          Executive Director

                                                                                       General Manager           General Manager (law)
     General Manager                             General Manager
                                                                                     Deputy General Manager
   Deputy General Manager                      Deputy General Manager
                                                                                     Assistant General Manager
   Assistant General Manager                   Assistant General Manager
                                                                                       Regional Manager
     Regional Manager                            Regional Manager
                                                                                           Manager
           Manager                                   Manager
                                                                                       Deputy Manager
     Deputy Manager                              Deputy Manager
                                                                                       Assistant Manager
     Assistant Manager                           Assistant Manager

Source : National Housing Bank
                                            Table A6.2: Organization Structure of Housing and Urban Development Corporation Limited

                                                                            Chairman & Managing Director

                                                                         Board of Directors


                                                   Director                    Director                       Company Secretary


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


Source: Housing and Urban Development Corporation Limited.




                                                                                                                                                                                   Appendix 6
                                                                                                                                                                                   33
34              Appendix 6


                   Table A6.3: Organization Structure of Housing Development Finance Corporation Limited

                                                           Board of Directors

                                                                 Chairman

                                                             Managing Director



            Personnel                         General Manager,              Executive Director,   Executive Director,
                                              Mumbai                        South                 North

      Treasury                                General Manager,
                                              Maharashtra                   General Manager,      General Manager,
                                                                            Karnataka             Gujarat
      Mumbai Office                           General Manager,
                                              Kolkata                       General Manager,      General Manager,
                                                                            Andhra Pradesh        New Delhi
      Accounts
                                                                            General Manager,      Area Manager, Punjab/
                                                                            Tamil Nadu            Haryana/HP/Chandhigarh
      Administration
                                                                            Deputy General,       Area Manager, Gujarat
                                                                            Manager, Kerala
      Library
                                                                            Branch Manager,       Deputy General Manager,
                                                                            Coimbatore            Uttar Pradesh
      Recoveries
                                                                            Dubai                 Branch Manager,
                                                                                                  Indore
      Secretarial & Dadar
                                                                                                  Branch Manager,
                                                                                                  Jaipur
      Deposits


      Technical Services
      Department

      Corporate Legal


      Communications


      Human Resouce
      Development & Centre
      for Housing Finance

      Information Technology


      User Support Group


Source:Housing Development Finance Corporation Limited.
                                                                                             Appendix 7    35
                              Lending Operations of the Borrowers
                                (approvals and disbursements)
                                          (Rs million)

NHB                                          1999        2000         2001        2002
Disbursements: of which                      7,742.7     8,921.8     10,776.4    11,360.5
     Refinance                               7,583.0     8,416.8     10,082.2    10,248.0
     Direct Finance                            159.7       505.0        694.2     1,112.5

Cumulative Refinance of which:              43,739.9     52,156.8    62,214.8    72,513.6
  Scheduled Commercial Banks                 2,375.7      2,399.7     3,438.4     4,346.6
  Housing Finance Companies                 33,980.6     40,495.3    48,109.0    55,308.1
  Others                                     7,383.6      9,261.8    10,667.4    12,858.9


                                                                                              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

                                 FINANCIAL STATEMENTS OF NATIONAL HOUSING BANK
                                                      Table A8.1: Balance Sheet
                                                      Fiscal Year Ending 30 June
                                                              (Rs million)

                  Item                                                         1999     2000     2001     2002
                  Liabilities
                  Capital
                          Authorized                                          3,500    3,500    3,500    3,500
                          Issued and Paidup (wholly subscribed by RBI)        3,500    3,500    3,500    3,500
                             Subtotal                                         3,500    3,500    3,500    3,500
                  Reserves
                          Reserve Fund                                        4,260    5,100    6,130    7,140
                           Special Fund
                              Rural Housing Fund                                700     700      700      700
                              Less: Amount borrowed from RBI out of             500     500      500      500
                              National Housing Credit (LTO) Fund
                              Less: Transferred to General Reserve                                        200
                          Other Reserves
                             Research & Development Fund                         50      50       50        50
                             Equity Participation Fund                          150     150      150       150
                             Savings Incentive for EWS Fund                      50      50       50        50
                              Less: Transferred to General Reserve                                         250
                                      Special Reserve in terms of Section 36 (1)                           513
                             Investment Fluctuation Reserve                      98      107      128        8
                             Subtotal                                         4,808    5,657    6,708    7,662
                  Balance of Net Profit                                           5        2        7        7
                  Bonds and Debentures                                      15,762    19,257   24,252   24,879
                  Deposits in HLAs                                            1,934    1,880    1,796    1,599
                  Borrowings
                          From Reserve Bank of India
                            - National Housing Credit (LTO) Fund              8,750    8,750    8,750    1,750
                            - Others                                              -        -        -      750
                          From Government of India                                -        -        -        -
                          From Other Sources
                             - In India                                     10,653    10,020    9,287    8,553
                             - Outside India                                  3,076    5,376    5,599    6,728
                             Subtotal                                       22,480    24,146   23,636   17,781
                  Gifts, Grants, Donations and Benefactions
                  Current Liabilities and Provisions                          2,184    2,428    4,441    4,178
                  Other Liabilities                                             278    2,730    3,642    3,490
                  Total (Liabilities)                                       50,950    59,601   67,982   63,095

                  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

Item                                                                  1999           2000           2001                2002

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

Less: Withdrawn from Reserve Fund                                     -              -              -                513.10
Less: Provision for Income Tax                                        -              -            78.50              636.60
Balance Profit transferred to Appropriation Account                585.20         836.90       1,035.10              560.10
           Total                                                   585.20         836.90       1,113.60            1,709.80

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

                                  Table A8.3: Ratio Analysis of National Housing Bank

Item                                        1999          2000         2001          2002

Return on Equity (%)                        7.29          9.58         10.69          8.85
Return on Assets (%)                        1.15          1.42          1.59          1.37
Debt-Equity Ratio                            4.9           5.3           5.3           4.5
Captial Adequacy Ratio                     16.86         16.61         16.83         20.16
Debt-Service Coverage Ratio                                             1.16
Source: National Housing Bank.

Asset-Liquidity Management

                         Table A8.4: Liquidity-Maturity Pattern of Assets and Liabilities, FY2002
                                                        (Rs million)

                                     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.

                         Table A8.5: Liquidity-Maturity Pattern of Assets and Liabilities, FY2001
                                                        (Rs million)

                                     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

         FINANCIAL STATEMENTS OF HOUSING AND URBAN DEVELOPMENT
                           CORPORATION LIMITED
                          Table A9.1: Balance Sheet
                          Fiscal Year ending 31 March
                                   (Rs million)

Item                                                            1999      2000         2001      2002
Liabilities
Capital
      Authorized
            Equity Shares                                     12,500    12,500      12,500     25,000
            Preference Shares                                      -         -           -          -
            Total                                             12,500    12,500      12,500     25,000
             Issued and Paidup                                 3,960     8,980      11,780     14,080
            Share Application Money                            1,810         -           -          -
               Subtotal                                        5,770     8,980      11,780     14,080
Reserves
            General Reserves                                   1,126     1,780       1,780      2,241
            Share Premium Account                                  -         -           -          -
            Capital Reserve                                        -         -           -          -
            Reserve for bad and doubtful debts                    92       139         194        252
            Special Reserve                                    2,707     3,338       4,063      4,836
            Debenture Redemption Reserve                       1,882     1,250       1,300      1,250
            KfW reserve                                          169       209         261        291
            Research and Development Reserve                      20        20          20         20
            Welfare Fund                                           -         -           9          9
               Subtotal                                        5,995     6,735       7,627      8,900
Borrowings
            Loans
            Government of India                                  524       485         439        220
            Banks                                             14,898    28,581      40,361     47,217
            Financial Institutions                            25,022    28,524      42,642     32,748
            Foreign Currency Loans                             4,453     9,287      10,870     10,458
            Others

           Bonds and Debentures                               43,305    44,922      43,647     63,292
           Deposits
           Public deposits (including interest-bearing         3,187     9,318       9,084     12,445
              cash securities)
             Subtotal                                         91,389   121,117     147,042    166,379
           Current Liabilities and Provisions                  8,944     8,855       8,876     11,322
           Total                                             112,098   145,688     175,325    200,681

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)

Item                                                           1999     2000     2001          2002
Expenses

     Interest paid on deposits, borrowings, etc.              8,824   11,971   16,018     17,700
     Establishment Expenses                                     257      253      374        476
     Auditors' fees                                               0        0        1          1
     Rent, taxes, insurance, lighting, etc.                      95      164      173        165
     Law charges                                                  2        2        4          5
     Postage, telegram, telex, and telephone                     12       13       15         16
     Stationery, printing, advertisement, etc.                   30       45       36         42
     Depreciation, amortization                                  46       50       47         91
     Other expenditure                                        2,137    1,805    1,816        500
     Balance of profit carried down                              76      297      251      1,189
                                                                906    1,280    1,575      1,550
Total                                                        12,384   15,881   20,309     21,732

   Less: Provision for Income Tax                              209       354      506           409
   Balance Profit transferred to Appropriation Account         697       926    1,069         1,141
Total                                                          906     1,280    1,575         1,550

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

Source: Housing and Urban Development Corporation Limited.
                                                                       Appendix 9     41


   Table A9.3: Ratio Analysis of Housing and Urban Development Corporation Limited

Item                                               1999     2000    2001            2002

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

Source: Housing and Urban Development Corporation Limited
42      Appendix 10

      FINANCIAL STATEMENTS OF HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED
                               Table A10.1: Balance Sheet
                               Fiscal Year Ending 31 March
                                        (Rs million)

Item                                                                  1999      2000      2001      2002
Liabilities
Capital
                  Authorized
                      Equity Shares                                  1,500     1,500     1,500     1,500
                      Preference Shares                                700       700       700       700
                      Total                                          2,200     2,200     2,200     2,200
                  Issued and Paidup                                  1,191     1,191     1,201     1,217
                  Subtotal                                           1,191     1,191     1,201     1,217
Reserves
                  Special Reserves No.1                              3,185     2,935     2,694     2,344
                  Special Reserve No.2                               2,020     3,020     4,310     6,060
                  General Reserve                                    4,510     4,976     6,200     7,651
                  Debenture Redemption Reserve                                             200       200
                  Share premium                                      8,248     8,248     8,506     8,937
                  Employee Stock Option Outstanding                               18        27        24
                  Capital Redemption Reserve                           500       500       500       500
                  Shelter Assistance Reserve                            64        71        83        96
                  Capital Reserve                                        0         0         0         0
                  Subtotal                                          18,527    19,769    22,519    25,811
Borrowings
                  Loans
                       IBRD                                          2,617     2,341     2,066     1,790
                       USAID                                         1,428     1,368     1,221     1,075
                       IFC, Washington DC                              725       725       725
                       CDC                                             924       739       536       336
                       ADB                                           3,696     5,474     5,587     4,705
                       Army Group Insurance                            250     1,000     2,000     2,000
                       NHB                                           5,611     5,327     5,700     5,066
                       Syndicated Loan-yen                                                         4,371
                       Scheduled banks                              15,617    27,020    30,708    38,004
                       LIC                                           4,194     4,774     4,404     4,034
                       Others (Finance Lease)                                                          4
                  Bonds and Debentures                              10,650    18,880    29,253    41,262
                  Deposits
                       Unsecured                                    52,473    62,185    72,374    84,777
                       Interest accrued and due                         51        53       124       133
                  Subtotal                                          98,236   129,885   154,698   187,557
Current Liabilities and Provisions                                   8,114    10,587    12,728    14,271
Total                                                              126,068   161,432   191,145   228,856
Assets
Cash and Bank Balances
                  Cash in hand and Balance with RBI                    174       501       795       513
                  Balance with scheduled banks                       5,454     9,310     7,583     8,529
                  Subtotal                                           5,628     9,812     8,378     9,042
Money at call and at short notice                                      950     1,000     1,700
Loans
                  Individuals                                       56,315    72,394    95,850   125,659
                  Corporates                                        25,032    27,129    35,561    45,001
                  Others                                               846     1,107       836     1,032
                  Subtotal                                          82,193   100,630   132,247   171,692
Investments
                  Securities of Central and State Governments        1,754     2,173     2,282     1,878
                  Stocks, shares, bonds, debentures and              9,359    10,142     7,895     6,701
                   securities for financing real estate projects
                  Stocks, shares, bonds, debentures and             13,426    21,029    20,253    20,731
                   securities of other Institutions
                  Subtotal                                          24,539    33,343    30,431    29,310
Deferred Tax assets                                                                                  545
Loans and Advances                                                   9,369    13,469    13,860    13,155
Bills Purchased, discounted/rediscounted
Fixed Assets (at cost less depreciation)
                  Land                                                 129       138       366       369
                  Premises                                             732       797     2,019     3,205
                  Others                                             1,702     1,196       830       691
                  Subtotal                                           2,562     2,130     3,215     4,266
Current Assets (less cash & bank balances)                             828     1,047     1,314       846
Total                                                              126,068   161,432   191,145   228,856
Source: Housing Development Finance Corporation Limited.
                Table A10.2: Income Statements of Housing Development Finance Corporation Limited
                                                      Fiscal Year Ending 31 March
                                                          (Rs million)
Item                                                             1999                 2000     2001     2002
EXPENSES

Interest paid on deposits, borrowings, etc.                   12,513                14,369   16,896   18,712
                          a
Establishment Expenses                                           249                   312      394      460
Directors', executive committee members'                           0                     0        2        3
fees & expenses
Auditors' fees                                                     3                     4        5        4
Rent, taxes, insurance, lighting, etc.                            94                   109      125      159
Law charges                                                        6                     9       12       12
Postage, telegram, telex, and telephone                           49                    52       67       80
Stationery, printing, advertisement, etc.                         65                    73      107      110
Depreciation, amortization                                       498                   436      457      318
Other expenditure                                                 82                   104      123      151
Balance of profit carried down                                    80                    80       80       83
                                                               3,889                 4,608    5,557    6,909
Subtotal                                                      17,527                20,155   23,824   27,002

Less: Provision for Income Tax                                    550                  590      820    1,109
Balance of Profit transferred to Appropriation Account          3,339                4,018    4,737    5,800

TOTAL                                                           3,889                4,608    5,557    6,909

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

Total                                                         17,527                20,155   23,824   27,002
a
 includes Staff expenses and travelling expenses.
Source: Housing Development Finance Corporation Limited.




                                                                                                               Appendix 10
                                                                                                               43
44   Appendix 10




       A10.3: Ratio Analysis of Housing Development Finance Corporation Limited

Item                                                         1999    2000    2001    2002

Return on Equity (%)                                         17.8    20.0    21.2    22.9
Return on Average Assets (%)                                  3.1     3.0     2.9     3.0
Earning per share (Rs)                                       28.0    33.7    39.4    48.0
Book Value per Share (Rs)                                   165.6   176.0   198.0   222.0
Debt-Equity Ratio                                             5.0     6.2     6.5     6.7
Captial Adequacy Ratio                                       16.2    14.1    12.7    14.5
Debt-Service Coverage Ratio                                   2.4     2.5             1.7
Source : Housing Development Finance Corporation Limited.
                                                                                      Appendix 11    45

   Table A11.1: Status of Compliance with Major Loan Covenants – National Housing Bank

                      Covenant                              Reference in Loan        Remarks
                                                                Document
The guarantor and the borrower will execute the action Loan Agreement           Partially complied
plan to the extent that actions thereunder are applicable (LA), Schedule 3,     with.
to or the responsibility of the guarantor or the borrower. para. 1

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



                       Covenant                              Reference in Loan        Remarks
                                                             Document

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

                      Covenant                           Reference in Loan      Remarks
                                                         Document

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



Covenant                                               Reference in Loan      Remarks
                                                       Document

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

Covenant                                                           Reference in         Remarks
                                                                  Loan Document

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

                          Covenant                                   Reference in      Remarks
                                                                    Loan Document
   (iv) potential of replicability in other parts of the                            Increased
   guarantor based on ease of implementation and financial                          availability of
   sustainability,                                                                  housing finance
   (v) commitment         of   executing     and    participating                   encouraged
        institutions, including participation of beneficiaries as                   demand from
        well as private institutions, and                                           beneficiaries.
   (vi) willingness and preparedness of state and local
        governments to implement subprojects quickly and in
        accordance with the project and action plan.

Subproject proposals to be submitted to ADB for approval
will include a detailed description of the inputs and their
costs; participation of households and their responsibilities;
financing and cost recovery; any resettlement or
compensation issues, as well as proposed resolution of
such issues; implementation plan including institutional and
household       responsibilities;   initial   environmental
examination of the subproject; and a long-term
maintenance plan. Such subproject proposal will also
include proposed measures to ensure sustainability and the
subproject’s usefulness as a pilot.

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

                        Covenant                            Reference in             Remarks
                                                            Loan Document
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 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

                       Covenant                            Reference in         Remarks
                                                           Loan Document

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

                        Covenant                                Reference in         Remarks
                                                                Loan Document

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

        Table A11.3: Status of Compliance with Major Loan Covenants – Housing
                       Development Finance Corporation Limited

Covenant                                                            Reference in         Remarks
                                                                   Loan Document

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

                         Covenant                                   Reference in      Remarks
                                                                   Loan Document
  (iv) potential of replicability in other parts of the                            Increased
  guarantor based on ease of implementation and financial                          availability of
  sustainability,                                                                  housing finance
  (v) commitment         of   executing     and    participating                   encouraged
       institutions, including participation of beneficiaries as                   demand from
       well as private institutions, and                                           beneficiaries.
  (vi) willingness and preparedness of state and local
       governments to implement subprojects quickly and in
       accordance with the project and action plan.

Subproject proposals to be submitted to ADB for approval
will include a detailed description of the inputs and their
costs; participation of households and their responsibilities;
financing and cost recovery; any resettlement or
compensation issues, as well as proposed resolution of
such issues; implementation plan including institutional and
household       responsibilities;   initial   environmental
examination of the subproject; and a long-term
maintenance plan. Such subproject proposal will also
include proposed measures to ensure sustainability and the
subproject’s usefulness as a pilot.

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

                        Covenant                            Reference in             Remarks
                                                            Loan Document
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 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

                       Covenant                            Reference in             Remarks
                                                           Loan Document

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

                        Covenant                                Reference in       Remarks
                                                                Loan Document

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.

								
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