By Chandeepa Wettasinghe
The only state-owned listed bank, the Housing Development Finance Corporation Bank (HDFC Bank) has submitted a proposal to the Prime Minister requesting a Rs.50-70 billion annual loan facility for the next 5 years for the urgent upgrading of low-end housing in the country.

“There are 677,000 housing units that need upgrading, and I have made a proposal to the government to support this bank, and other banks, with some funding for the next 5 years,” HDFC Bank Chairman R. J. De Silva told Mirror Business.

He noted that the project would, instead of burdening the Treasury, provide it with a handsome return in the 15 years of repayment, similar to how a housing project initiated during the 2002 United National Party regime is bringing returns now, setting a precedent.

“We have designed the proposal in such a way that it won’t be a burden to the Treasury. On the contrary, we want to be a good tax payer, so that the taxes can also be used by the state to look after these very people,” de Silva said.

He said that HDFC Bank would lend the money to customers, and provide the services of surveyors and other professionals, which would eliminate customers from borrowing more than they could afford or would require for repairs.

“People are expecting the government to build houses for them, which I don’t think is a good thing. The government has to be a facilitator. The government will lend money to us and be the facilitator, and we the banks will do the business,” de Silva said.

He added that HDFC Bank is flexible in providing either asset-based or cash flow-based loans depending on the individual, since the low-income segment is marginalized by commercial banks.

De Silva said that taking into consideration an average of Rs.500, 000 to upgrade a house, customers will have to pay roughly Rs.5,000 a month for 15 years, which is affordable and attractive for most of the low-income groups.

 “We will have a very small margin for our administration costs, and ensure that this problem is solved within these 5 years. So, it’ll be a large Gam Udawa,” he said.

However, as reported on Mirror Business recently, the government intends to provide banks with funding to allow the building of 500,000 new houses in Colombo for the middle class, who are said to be marginalized due to a build up of luxury housing and government projects to relocate slums.

De Silva said that there is an excess of 540,000 houses in the country—mainly upper and upper middle class centred on the Western Province—while around 1 percent of the population is homeless, and just 50,000 new houses are needed each year to support the population growth.

“We’re looking at the low-income sector which requires support, because this is where problems start in the country. The housing inadequacy and village level will see that these people get involved in other illegal activities... and we’ve already had 3 insurrections and a war,” de Silva said.

He said that even though most people in the plantation areas the North and the East, and the outskirts of the Western Province have houses, they are not adequate, and better houses are not affordable, which forms the rationale for the proposal.

De Silva noted that without upgraded housing, most children in the segment would have to study and sleep in the same room which is also used as the kitchen and the living room, which disturbs the wholesome growth of the future minds of Sri Lanka.

“Then, the toilet facilities are outside, so I don’t know how they go to the toilet these days when it rains and floods,” he added.

HDFC Bank evolved into a specialized bank from a building society established in 1983. De Silva said that HDFC Bank even funds luxury housing projects exceeding Rs. 10 billion, which allows it to maintain profitability and stay attractive on the stock exchange.

Around 95 percent of HDFC Bank’s assets are in housing, while it also engages in all activities of a commercial bank except for current accounts. The state owns 51 percent of the bank.