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By Channa Kasturisinghe

The Housing Development and Finance Corporation (HDFC) will be able to increase its loan portfolio with the implementation of the Government sponsored affordable housing finance scheme as it would be able to cater to more low and middle income groups who comprise 75 percent of the housing loan applicants, HDFC General Manager C.A. Sarathchandra told the 'Daily News' yesterday.

He said the HDFC is confident that along with the other participatory credit institutions, it would be able to utilise the entire Rs. 3,000 million allocated by the Treasury for the housing finance scheme.

HDFC will play the role of the facilitator to the Treasury in implementing the loan scheme as the apex agency.

"The loan scheme will be available through major commercial banks, regional development banks and specialised housing finance institutions. They will disburse the loans with their own funds and the Government will arrange hundred percent refinance facilities. The HDFC's role will be to ensure that these loans are provided in compliance with the requirements of the loan scheme. We will be operating a separate project office for this purpose," Sarathchandra said.

He said the banks will not find it difficult to utilise the entire sum allocated by the Treasury as the loans are given four percent less than the current rate in the market.

"If we analyse the supply and demand in this market we would find that there is a marked disparity. The total annual demand of houses is about 70,000 in this country. Only 10 percent of this amount is catered to by private developers who target the upmarket. Poor families which comprise only 15 percent are usually catered to by the Government. Although about 75 percent of the entire housing demand come from low and middle income groups the lack of a low cost housing finance facility has contributed largely to the shortage of houses.

The loan scheme introduced by the Government will cater mostly to the low and middle income groups. Therefore we will be able to accept the majority of applications we receive once the loan scheme is implemented. We expect that the low rate of interest and the long period for the loan repayment would enable the borrower to repay the loan without difficulty ," Sarathchandra said.

The Banks acting as participatory credit institutions signed the agreements with the Treasury last week. Under this scheme loans will be granted to construct houses, outright purchase of houses, land for building a house and extension of area to an existing house.

Those who earn a monthly income of up to Rs. 20,000 only will be eligible for loans under this scheme against the security of mortgage over the property up to a maximum of Rs. 500,000. These loans will be disbursed to borrowers at an interest rate of 10.5 percent per annum, which is considerably lower than the market and the loans will be made available for a period of up to 15 years subject to the age of retirement of the borrower.

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