Tec

Housing Finance
in Emerging Economies
World Bank Group Board Presentation - June 9, 2005

Outline
Why Housing Finance ?
How to Expand Housing Finance
World Bank Strategy, Products
IFC Strategy, Products
Challenges for the World Bank Group

Why Housing Finance?

Engine of equitable economic growth

Key for investment, households wealth, savings, consumption, labor

markets, fiscal returns, retirement system
Collateral to unlock capital (dead housing assets, De Soto)
ECA housing stock privatization: > $ 1 trillion (asset rich, cash poor)

Meet a growing housing demand (urbanization,

demographics)

Prevent slum proliferation (cities built the way they are financed)
Reduce poverty (asset building, retirement, empowerment,
community strengthening, improved living conditions)

Take part in the financial sector liberalization (banks, non

bank lenders, domestic bond markets, pension funds, etc.)
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How to build inclusive and sustainable HF system?

Sizeable & durable investment that needs debt leverage

Required sound foundations

Relative macroeconomic stability
Workable legal system (titles, foreclosure)
Risk management, funding tools & regulations
Competing private lenders
Affordable housing (cf. supply constraints)

Enabling role of the State

Less of direct lender/builder, rather build conducive
market environment, catalyst role to expand accessibility
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How to Expand Housing Finance

Products
Credit products (term, rates, amortization)
Broader distribution channels
Micro finance applied to housing
Housing saving schemes
Construction, infrastructure and rental finance

Policy
Affordable land use & urban development rules
Efficient registration of property titles & liens
Smarter HF-related subsidies
Instruments to reallocate part of the additional risks

Bank Project Opportunities (Loans, Guarantees, TA)

ENVIRONMENT/
INFRASTRUCTURE

PRIMARY
MARKET

SECONDARY
MARKET

Land use, urban development and housing policy

Property title registration and effective foreclosure
Construction quality, security and finance
Land infrastructure
Professional real estate intermediaries
Effective rental markets
Smarter subsidies
Finance lower income housing
Safe lending regulations & standards
Consumer information & protection
Risk management tools (insurance, guarantees)
Micro finance, housing savings, Islamic finance
Capacity building & funding of lenders, insurers
Choice of proper model (s)
Legal and regulatory framework
Access to longer-term matched funding
Take off funding or guarantee support
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IFC Programmatic Approach

Technical
Assistance
and
Information
Building

Investment

Building Viable Mortgage Markets in

Emerging Market Economies

Legal/Regulatory

Role of Gov.

Property
Rights/Foreclosure

Financial Sector Dev.

Securities markets
Pension Funds

Macroeconomic
Stability
local currency

IFC Investment Products

In. Risks

investmentsatdifferentlevelsinthevaluechaingiventherisks
Structured
Finance:

CAPITAL
Capital
Markets
MARKETS

Credit En.
Risk Sharing
Debt:
Credit Lines
Warehouse
Credit Lines

MORTGAGE
Mortgage
Finance
FINANCE

Liquidity
Facilities

CONSTRUCTION
Construction
FINANCE
Finance

Equity:
Conduits
Mortgage Ins.
Servicing Co.

Land Finance

Originators
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Mortgage Warehouse Line

(for a Developer cum Originator)
Phase I
IFC
International Finance Market

Mortgages
Credit Line

Collateral for IFC

Developer-cummortgage originator

Home Buyers

Trustee
Security Vehicle
Local Mortgage Market

Phase II

Institutional
Investors

Securitization

Local Capital Market

IFC: the Challenges for the Future

How to get to true poor? (The case of Mexico)

Microfinance for housing; and

Remittance mortgages
Impacting the supply side

Increase house production via developer financing

Ensure affordability
Creating new products/relationships to expand impact

Access to long term local currency (NCPIC program)

Islamic housing finance
Energy efficiency products
Mortgage finance provided by sub-sovereigns

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World Bank Group Role

Develop housing finance markets
Set up infrastructure, legal and regulatory framework for markets
Make housing markets more affordable & secure property rights
Develop framework for risk management and funding tools
IFC to support private transactions

WBG comparative advantages

Honest broker role
Long-term presence during a process of reforms
World expertise & knowledge transfer
Integrated approach: urban & finance, public & private sectors

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