2009 Low Income Housing in India AMSTERDAM BEIJING

2009 Low Income Housing in India AMSTERDAM BEIJING CAMBRIDGE CHICAGO DELHI DUBAI FRANKFURT HONG KONG Financing Low Income Housing: Magnitude and Economics JOHANNESBURG LONDON LOS ANGELES MADRID MANILA MOSCOW MUMBAI MUNICH Based on a Project for NHB with support from World Bank, IFC and MSDF NEW YORK PALO ALTO PARIS October 29, 2009 SAN FRANCISCO SÃO PAULO SEOUL SHANGHAI SINGAPORE STOCKHOLM TOKYO TORONTO ZURICH Copyright © 2009 by Monitor Company Group, L. P. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means — electronic, mechanical, photocopying, recording, or otherwise — without the permission of Monitor Company Group, L. P. This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion.

Monitor Group: An Introduction Founded by renowned academics, the Monitor Group has grown rapidly to become a leading global management consulting firm Michael Porter, Harvard Business School Director and Co-Founder of the Monitor Group l Founded by Michael Porter and other HBS faculty in 1983 l Renowned for focus on strategy and cutting-edge ideas that help clients grow We believe that “Ideas can create impact” With over 25 offices across the globe, we go the last mile… Corporates • Growth Strategies • Leadership & Innovation • Private Equity Funds Governments • City Strategies • Cluster Development • Country Competitiveness 2 Non Profits • Social Venture Funds • Impact Investing • Education Ecosystem Copyright © 2008 Monitor Company Group, L. P. — Confidential — IND

Financing Low Income Housing: Market Potential 1. Context: The Business Opportunity and Social Need 2. Economic Potential 3 Copyright © 2008 Monitor Company Group, L. P. — Confidential — IND

Context Low Income Housing: The Landscape Urban India has a vibrant housing market and housing finance has grown at a CAGR of over 35% for the past 13 years 1. However, the supply of housing stock is concentrated on the upper income groups — the low income segments are largely un-served Typical Low-end housing available in urban markets Urban India — Expenditure Pyramid 2 Income MHE: >Rs 9, 625 pm MHE: Rs 4, 575– Rs 9, 625 pm MHE: Rs 2, 500– Rs 4, 575 pm l 16% (10 MM) 37% (~23 MM) Rs. 11, 000 US $ 220 l Rs. 5, 000 US $ 100 33% (~21 MM) l Rs. 2, 500 MHE: <Rs 2, 500 pm Area of city: Within an hour from the city centre – Close to primary, secondary schools, healthcare centre and market place – Well connected to city by bus/train linkages Typical complex would comprise 3 to 5 buildings with 4 to 8 flats/ floor and 4 floors – Regular water and electricity – No lifts and single set of staircases – Complex would be fenced by a compound wall with shared open spaces including garden and access to play area for kids Each flat has a super built up area of 450 -550 sq. ft. – 1 BHK with an attached toilet and bathroom – Well painted walls and good interiors – Rs 400 -500 per month as maintenance charges 14% (~9 MM) Cost : Rs 450, 000 to 600, 000 Less than top 16% of Urban Indian households can afford to own houses Property rates across various cities suggest that it should be commercially viable to build affordable housing in the suburbs for low income customers in urban India 1 Excluding the recent economic downturn; 2 2005 data- based on the report done for NHB in 2006 Source: NHB Trends in Housing; CRIS Infac Report; Monitor Research 4 Copyright © 2008 Monitor Company Group, L. P. — Confidential — IND

Low Income Housing not Low Quality Housing Pilot Project- Layout of Building 5 Copyright © 2008 Monitor Company Group, L. P. — Confidential — IND

Context Low Income Housing: Social Need and Willingness to Pay Detailed customer research and our interaction with over 2, 000 customers on the ground showed high need for a “house of their own” among people living in appalling living conditions Profile - Nathubhai Has steady job as a factory worker in a textile enterprise in Ahmedabad l Monthly HH income ~ Rs 8000, savings up to Rs 900 - 1000 p. m. l Lives in 1 Rm. K in low income neighborhood, Rent Rs 1800 Family size 5 with mother, wife and 2 children Assets – Bank Account (ICICI), Life Insurance (Rs 3 L), TV set l l l Education – Both children attend private Gujarati medium schools Rent – Increased by 50% in past 3 years and moved every 2 to 3 years Appalling conditions of Slum-Dwellers l l l Live in poorly constructed small cramped houses Poor sanitary conditions – shared toilets, bad drainage, water logging during monsoons Lack of facilities – properly planned access points, walkways, gardens, dedicated schools etc. Profile - Ganesh l l l l Self-employed Mechanic in Mumbai Monthly HH income – ~Rs 11, 000, savings up to Rs 1000 p. m. Lives in 150 sq. ft. room in slums, Rent Rs 2400 Married with wife and 2 children Assets – Bank Account (ICICI), Life Insurance (Rs 1. 5 L), Refrigerator and Personal Computer Education – Both children attend Englishmedium school Rent – Has seen significant & frequent increases in rent, has moved house 5 times in 12 years Both share a dream… “A house of their own”……. Can afford a 250 to 350 sq ft house, willing to make 20% down payment & pay 35% of monthly income as EMIs to realize their dream Source: Primary Research (n=2000), Monitor Analysis 6 Copyright © 2008 Monitor Company Group, L. P. — Confidential — IND

Context Low Income Housing: The Economic Potential The low-income housing segment (MHI of Rs 5, 000 – 20, 000) is estimated at 22 Million households with an estimated opportunity size of Rs. 1, 100, 000 Cr and is largely underserved Urban Income Pyramid MHI 1 (Rs) 1% (0. 7 MM) >80000 40000– 80000 5% (3. 4 MM) 30000– 40000 4% (2. 7 MM) 5% (3. 4 MM) 20000– 30000 10000– 20000 Offering & Supply of Housing Finance l Price of unit 2 > Rs 25 Lacs l l Potential demand from ~2 M HHs with estimated Market Size of ~Rs 500, 000 Cr Various mortgage finance options available for segment l Potential size of mortgage market ~ Rs 400, 000 Cr l Mortgage finance available broadly l Potential size of mortgage market ~ Rs 675, 000 Cr l Severely constrained supply of housing finance for informal sector l Finance available for MHI > Rs 12 K in the formal sector, limited availability below MHI of Rs 12 K formal sector and 20 K for informal sector l Potential size of mortgage market ~ Rs 8, 80, 000 Cr l Various mortgage finance options available for segment l Price of unit: Rs 10– 25 Lacs l Potential demand from ~5 M HHs with estimated Market Size of ~Rs 900, 000 Cr l Mortgage finance available broadly l Price of House: Rs 3– 10 Lakhs 22% (15. 0 MM) 5000– 10000 31% (21. 1 MM) <5000 33% (22. 4 MM) l Potential demand from ~ 22 with estimated Market Size ~Rs 1, 100, 000 Cr Mn 3 HHs Note: 1 Monthly Household Income; 2 Affordability defined as households which have EMI / MHI Ratio of 40% of a Home loan which has a 20% down payment on an Home value, EMI level of Rs 1, 200 per Lac (at 12% interest for a 15 year loan); 3 Conservative estimates that 60% of total households in MHI of Rs 5 -20 K (36 Mn) are renting and looking to buy a house of their own. Source: NHB Trends in Housing; CRIS Infac Report; Monitor Research 7 Copyright © 2008 Monitor Company Group, L. P. — Confidential — IND

Market demonstration of Demand There is increasing construction of low income private sector housing projects across India Large real estate players like the Tatas and entrepreneurs like Jerry Rao are starting to recognize the business potential of low income housing and constructing large projects, thereby giving the field increased credibility Mumbai : Ambivili Neptune Group 100 acres Phase 1: 1800 units; Sector 1: 600 flats sold out in 3 days 1 -BHK and 2 -BHK Rs 4. 73 Lakh and Rs 8. 40 Lakh Ahmedabad: Vatva Taral Bakeri Phase 1: 800 units Price: Rs 3. 3 Lakh– 5. 6 Lakh Maharashtra: Boisar Tata Housing 67 acres: Phase 1: 1200 units for LIH 1 -RMK and 1 BHK Rs 3. 9 Lakh and Rs 6. 7 Lakh Bangalore: Atibele Janadhar 11 acres: 1500 units 1 BHK and 2 BHK; Rs 4 Lakh and 6 Lakh Source: Monitor Research Bangalore: Value Budget Housing Development Corporation Rs 3 -9 Lakh townships on minimum 10 acre plots; 1 Million intended flats 8 Ahmedabad: Vatva Foliage Developers Phase 1: 400 units Price: Rs 2. 81 lakh upwards Maharashtra: Karjat TMC – Matheran Realty 15, 000 units by June 2011; 3, 000 units in Phase 1 – June ’ 09 6, 000 flats @ Rs 3 Lakh Copyright © 2008 Monitor Company Group, L. P. — Confidential — IND

Monitor’s activities for the past two years Facilitating Low Income Housing: “Doing what it takes” Encouraging Developers Dissemination Conveying the opportunity l Arranging customer financing l Obtaining customers l Sharing “best practices” (architectural designs, site layouts, etc. ) Press including Real Estate trade journals (over 20) l Conferences and group sessions (over 30) l One on one meetings with broad range of stakeholders (over 400) l l Building the Ecosystem Existing and new players for mortgage finance (including incubating a housing finance company) l PE and VC funds (incubated a USD 100 Million housing ecosystem fund) l Research on optimal architectural designs, low cost construction technology, sustainability etc. l 9 Copyright © 2008 Monitor Company Group, L. P. — Confidential — IND

Financing Low Income Housing: Market Potential 1. Context: The Business Opportunity and Social Need 2. Economic Potential 10 Copyright © 2008 Monitor Company Group, L. P. — Confidential — IND

Context A Stand -Alone Low Income Housing Business: Outline The business will primarily focus on the urban customer in the Income Group Rs 5 -15 K who does not have to access to a home loan facility l Customer Profile and Focus l Urban The need for low income housing and home loan financing is especially acute in urban areas, which are seeing rapid population expansion through migration from rural areas Reach: The HFC will have an urban focus and will establish presence in Metros and surrounding Tier I/II/III cities l Branch: Hub and Spoke model with 55 branches by Year 10 l Target Monthly Household Income range: Rs. 5, 000 – 15, 000 l Both salaried customers who are unable to access home loans and informal sector customers, i. e. self-employed and salaried unorganized individuals Primary Product: Loan for home purchase Product Offerings and Pricing Structure l Loan Amount: 2 – 8 Lakhs: Families earning between Rs. 5, 000 and 20, 000 can afford homes costing up to 40 times their monthly income, i. e. Rs. 3 – 10 Lakhs l Loan to Value: 50 – 80%: A minimum of 20% equity from the customer will help mitigate the financier’s risk, while ensuring that the loan is not sub-prime l Installment-Income Ratio (IIR): 30 - 40%: This income group typically pays between 20 - 25% of their monthly incomes as rent, so a 30 - 40% EMI is feasible l Loan Tenure: 6 – 15 years: Will vary based on the customer’s income Pricing Structure l Adjustable Rate Mortgages with typical interest rates between 11 - 15% based on down-payment amount, IIRs, loan Tenure, and perceived risk profile of customer; and allowing approximately a 3 -4% spread l Processing fee of 1% of loan value to re-cover loan origination and credit check costs 11 Copyright © 2008 Monitor Company Group, L. P. — Confidential — IND

Economic Potential Revenue Potential for a Low Income HFC It is estimated that at the HFC will achieve significant growth over 10 years – disbursing close to 2, 60, 000 loans worth ~ Rs. 10, 000 Crores Assumptions 1 Cumulative Growth in Loans Portfolio Growth Projections over 10 years Cumulative Number of Loans Disbursed Y 3 Y 4 Y 5 Y 6 Y 7 l Average Ticket Size is Rs. 4 Lakhs l Interest Rate: 14%; Gross Spread of 4% l Loan To Value: No more than 80% l Sanction and Disbursal: 12 month time lag between initial disbursement and commencement of principal repayment Y 8 Y 9 Y 10 l Scheduled loan Tenure is 15 years l The average loan gets repaid in 8 years and there is no prepayment penalty Cumulative Amount of Loans Disbursed (in Rs Crores) Observations 6, 891 (Rs. Cores) Cumulative Value of Loans Disbursed Y 2 Since the HFC market is extremely underpenetrated – it is feasible to assume Year on Year growth rates between 50 – 200% for a start-up, decreasing yearly (MHFC assume 100% growth in the first 5 years; established companies like Dewan & LIC grow at about 25% yoy typically) 258, 398 172, 266 114, 844 65, 625 Y 1 l 4, 594 l The HFC will operate at a loss for the first few years, but will turn profitable by year 3 l It is possible to model more aggressive or conservative growth scenarios based on the capital reserves available, high level strategic objectives (desired share of the market) of the promoters, supply of low income housing stock etc. l Cumulative Portfolio Size is dependent on Average Ticket Size of loan, with bigger loans resulting in a larger book size 2, 625 Y 1 Y 2 Y 3 Y 4 Y 5 Y 6 Y 7 Y 8 Y 9 Y 10 Note: 1 Assumptions are based on interviews with Dewan Housing Finance Company, MAS Rural Housing and Finance, MHFC, and Fullerton Capital 12 Copyright © 2008 Monitor Company Group, L. P. — Confidential — IND

Economic Potential Customer Level Economics- Revenue and Costs at Branch Level The average cost to acquire a customer is Rs. 8, 000 and the cost to service their loan over their repayment period is Rs. 20, 000, while the net income earned per customer is Rs. 88, 000 Cost to Serve Per Customer (Rs. ) Per Customer Cost Analysis Assumptions l Average Loan Size: Rs. 4 Lakhs l Interest Rate Charged: 14% l Loan Processing Fee: 1% l NPA: 1. 0%1 l A 0. 5% of loan value bonus is provided to the branch sales force as an incentive fee for each loan generated l These assumptions are typical for most HFCs (our data comes from Dewan, GRUH, HDFC and MHFC) Legal & Sales Office Documentation, Average Operating Total Cost Technical Incentive Overheads Storage & NPA Overheads to Serve clearance Retrieval Income Earned Per Customer (Rs. ) Per Customer Revenue Analysis Observations Net Interest Income Processing Fee Total 13 l It costs approximately Rs. 32, 000 to serve each customer, i. e. cost to serve is about 8% of loan size, l The HFC would earn approximately Rs. 88, 000 in net income from each customer l Net Profit Per Customer Over 8 years (not including other costs) is approximately Rs. 56, 000 Note: 1 DHFC and Gruh NPAs are less than 1% Copyright © 2008 Monitor Company Group, L. P. — Confidential — IND

Economic Potential Profitability over a 10 year time frame The HFC will turn profitable after 3 years of operations, and it is anticipated that margins will grow sequentially in progressive years Net Profit/(Loss) (Rs. crores) Profitability over a 10 year time period Assumptions 1 l Average Loan Tenure: 8 years l Cost of debt: 10% l Debt Equity ratio: 180. 3 Ø Ø 101. 9 Y 1 Y 2 Y 3 Y 4 Y 5 Y 6 Y 7 Y 8 Y 9 Year 5 - 4: 1 Year 10 - 6: 1 l Capex in Years 1 to 3 - Rs 3 cr (towards software and hardware) l Net Profit/Loss = Post Tax (Income – Expenses) l ROE = Net Profit/Loss / Average Equity l ROA = Net Profit/Loss / Average Assets Y 10 Return On Assets Percentage Return On Equity Observations 2. 2 -3. 0 l ROE of 23% in year 10 is very robust by the Indian financial industry standards l ROA of 3% in year 10 is comparable to HFC industry standards -4. 0 -13. 9 Y 1 Y 2 Y 3 Y 4 Y 5 Y 6 Note: 1 Based on conversations with HFC Industry Experts and existing HFCs Y 7 Y 8 14 Y 9 Y 10 Copyright © 2008 Monitor Company Group, L. P. — Confidential — IND

Low Income Housing as a Driver for Economic Growth: Wide Range of Benefits Low income housing can provide huge benefits to families, communities and aid overall economic development of state Provide alternative to Urban Slums l l ~40 M people live in urban slums without basic facilities such as sanitation, water, schools, etc Renters disempowered. All power is w/ slum lords Slum lords “own” houses and benefit from Slum Rehabilitation Schemes Slums create high pressure on infrastructure within a city Benefits for families of Urban Poor l l l Housing is essential for the well-being of a family Enhanced security and health through organized housing with access to sanitation Access to better services (schools, healthcare etc. ) which are typically available to higherincome groups Aiding Overall Economic Development l l Construction of low income housing provides disproportionate job creation Creates significant economic value for state (taxes, ancillary economic activity, source of labor potentially leading to industry, etc Affordable Housing Creation of Low-Risk Asset for Families l l l Benefits to Communities Long term wealth creation due to value of asset, “saving on rent” & collateral for loan A “security net” in crisis Low income houses typically built on land with low cost per sq. ft. Low likelihood of price depreciation, Hence downside risk is low l 15 Neighborhoods with good quality housing have lower crime rates, stronger local economies and a better overall quality of life Copyright © 2008 Monitor Company Group, L. P. — Confidential — IND

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Access to Housing Finance: A Market Overview Although supply is beginning to flow majority of Banks and Housing Finance Companies are reluctant to serve customers in the informal sector because of the uncertainty of their risk profiles Ticket Size Select HFCs (e. g. , DEWAN HOUSING) Alternate means of income assessment for higher income customers such as supplier and customer checks, or MFI and chit fund savings history; guarantor typically required 10 Lakhs Low-end focused HFCs (e. g. , GRUH, MAS) Limited geographic coverage & capacity Trying to move to higher ticket sizes to 5 Lakhs increase profitability Largely Un-served 2 Lakhs Some PSU schemes, but difficult to access loans due to bureaucracy; staff incentives geared towards disbursement targets Informal Paid / earns in cash No formal income documents No formal residence/identity documents Source: Monitor Research ‘Semi-formal’ Salaried or Self Employed Significant proportion of undisclosed income Some residence/identity documents Formal Salaried with pay slip Income Tax documents Residence Documents Identity documents Bank account Difficulty of Assessing Risk 18 Copyright © 2009 Monitor Company Group, L. P. — Confidential — IND

Context Housing Finance Market: Map of Existing Players There are 45 registered HFCs in India, and these are split almost evenly between organizations that can accept deposits from the public and those that cannot • Vishwakriya Housing Finance • HUDCO • IDBI Home Finance • PNB Housing Finance • Deutsche Postbank Housing Finance • HBN Housing Finance • Indiabulls Housing Finance • GE Money Housing Finance • Maharishi Housing Development Finance Corporation • Swarna Pragati Housing Micro Finance Private Ltd. MAS Rural Housing and Mortgage Finance • SRG Housing Finance • Akme Buildhome Private Ltd. Satyaprakash Housing Finance India • Rose Valley Housing Development Finance Corporation • Sahara Housingfina Corporation GRUH Finance Cent Bank Home Finance Utkal Housing Finance • GIC Housing Finance • HDFC • ICICI Home Finance • Dewan Housing Finance Corporation • LIC Housing Finance • AIG Home Finance India Orange City Housing Finance • Inara Housing Finance • Janhavi Home Development and Finance Vastu Housing Finance Corporation • Can Fin Homes • DHFL Vyasa Housing Finance • Manipal Housing Finance Syndicate • Haware’s Housing Development Finance Corporation • India Home Loans Limited • Mahindra Rural Housing Finance • Micro Housing Finance Corporation • Swagat Housing Finance Company • Reliance Home Finance • India Infoline Housing Finance • Tata Capital Housing Finance • Sundaram BNP Paribas Home Finance • REPCO Home Finance • Ind Bank Housing • National Trust Housing Finance Kerala Housing Finance HFCs that canaccept Deposits HFCs that cannot accept Deposits Source: NHB 19 Copyright © 2008 Monitor Company Group, L. P. — Confidential — IND

Context Barriers to entry for Housing Finance Companies are reluctant to serve customers in the informal sector because of the uncertainty of their risk profiles Ticket Size Select HFCs (e. g. , GRUH, Fullerton) Alternate means of income assessment for higher income customers such as supplier and customer checks, or MFI and chit fund savings history; guarantor typically required 10 Lakhs Low-end focused HFCs (e. g. , DHFC, MAS) Limited geographic coverage & capacity 5 Lakhs Trying to move to higher ticket sizes to increase profitability Largely Unserved Some PSU schemes, but difficult to access loans due to bureaucracy; staff incentives geared towards disbursement targets Informal Paid / earns in cash No formal income documents No formal residence/identity documents ‘Semi-formal’ Salaried or Self Employed Significant proportion of undisclosed income Some residence/identity documents Formal Salaried with pay slip Income Tax documents Residence Documents Identity documents Bank account Difficulty of Assessing Risk Source: Monitor Research 20 Copyright © 2008 Monitor Company Group, L. P. — Confidential — IND

Confidential Low Income Segments as Target Market Largely-Untested Risk Profile, different from Sub-prime in the USA Sub-prime Experience in USA Low-Income Housing in India Very high LTV; creative structures developed to reduce EMIs l Loans extended without due consideration to ability to pay (basis employment history) – financing provided to those with questionable employment record l Cost of asset disproportionately high compared to replacement cost; this is attributed to the real estate asset bubble in the US – hence high risk of payment default 75 -80% LTV – significant individual contribution required; EMIs tend to be 35% of Monthly Income l Target customers have regular employment, albeit with low income – with an unproven credit record which needs to be tested l In the low income segment, relatively low cost of land (esp. in peri-urban areas) leads to high correlation between cost of asset and replacement cost; and hence lower risk of asset bubbles l l l Outcome: Sub-prime Defaults and Foreclosures SFS-HMM-VBHL 2 nd Review Blank Loop_v 8 -081022 -SA l 21 Outcome: Untested, relatively low-risk segment with significant business potential Copyright © 2008 Monitor Company Group, L. P. — Confidential

Confidential Key Challenges and Critical Success Factors Understanding Key Challenges Understanding real versus perceived credit risk and managing costs to serve are the key challenges for HFCs serving the informal sector Understanding the risk profile of the informal sector Cash micropayments Managing Construction Risk (Developer Tie-Ups) Source: Monitor Analysis SFS-HMM-VBHL 2 nd Review Blank Loop_v 8 -081022 -SA l Unconventional methods are required to measure the credit risk associated with low income informal groups, in the absence of formal documentation l Alternate methods of income verification income such as understanding the customer’s savings history (chit funds, MFIs), business (access to credit from suppliers, line of credit to customers, daily cash flows etc. ) are required l Collecting a large number of small payments that originate from the customer as cash is difficult and expensive l Most HFCs use a post-dated cheque or ECS system, but this requires that the customer have a pre-existing bank account l If a cost-effective system to address cash micropayments is implemented, it is anticipated that default rates will drop significantly – default rates among Dewan Housing Finance Limited’s cash paying customers are extremely low (0. 13%, as against an average industry NPA of 1. 5%) l As low cost housing finance is mostly driven by access to supply of appropriate homes, performing adequate due diligence on developer partners is paramount l Managing delays in construction by structuring loans to be delivered post construction in staged phases of the project – this will incentivize the developer and avoid lengthened interest payments from the customers because of project delays l Lack of adequate access to wholesale construction finance from commercial sources 22 Copyright © 2008 Monitor Company Group, L. P. — Confidential

Confidential Key Challenges and Critical Success Factors Enabling Regulatory Environment and Government Policy There a variety of potential government and interventions that could help catalyze the low income housing finance sector Govt and NHB interventions l Access to sources of long term, low cost funding (ideally below market rates) to enable HFCs to keep consumer interest rates low l Expediting NHB timelines for granting HFCs approvals and improved transparency into the process would enable rapid and efficient market entry for new players. l Creating a guarantee fund that could take the first X% of losses against lending to low income groups would encourage new players to enter the market – This would allow these players to build a better understanding of risk in the segment and in turn appropriately price risk into their mortgage products. Process and Technology Innovations Leveraging the MFI network Source: Monitor Analysis SFS-HMM-VBHL 2 nd Review Blank Loop_v 8 -081022 -SA l Allow daily cash collections of EMIs through network of collection agents/MFIs or at the branch l Introduce a seasonal loan products that enables customers to tune their repayment cycle to their seasonal income cycles l Linkages between customers’ savings accounts and repayment schedules to enable direct deposits of EMIs etc l Mobile banking facilities to enable prompt repayments from customers lacking bank accounts l Use MFIs extensive knowledge of the target customer base to select customers with strong repayment history and lower perceived risk l Employ MFIs extensive staff of Field Officers for loan collection and disbursals of loans l Encourage the government to make it easier for MFIs to set up HFC divisions 23 Copyright © 2008 Monitor Company Group, L. P. — Confidential

Confidential Establishing a Housing Finance Company in India Monitor Inclusive Markets’ Role Monitor is well positioned to help incubate new Housing Finance Companies focusing on the low income sector, through its knowledge of the low income space in India as well as its deep networks Disseminate Concept & Help New Players Adopt the Business Model Facilitate Access to Capital Link HFC to key players in the Low Income Housing Ecosystem through Monitor’s networks SFS-HMM-VBHL 2 nd Review Blank Loop_v 8 -081022 -SA l Introduce the concept of housing finance and disseminate information on the commercially viable business opportunity to provide housing finance to low income customers to broad groups of stakeholders l Actively assist new players interested in entering the HFC space with their market entry strategies and business plans l Assist in preparation of Information Memorandums for HFCs looking to raise funds l Connect HFCs to Private Equity investors looking to invest in the low income housing finance ecosystem l Actively assist in the fundraising process through broader introductions and brokerage with sources of capital such as multilateral institutions, foundations, impact investing networks etc. l Assist entrepreneurs through our knowledge of the process of setting up an HFC and introductions to experts and prior successful applicants l Connect the HFC to lawyers and technical experts with deep expertise in housing finance l Introduce the HFC to Monitor’s vast networks of developer partners, and facilitate tie-ups between the HFC and specific low income housing projects 24 Copyright © 2008 Monitor Company Group, L. P. — Confidential