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LESSONS:

India: Housing Finance II Project

sector: Finance | country: India

Three major lessons have been identified by Independent Evaluation Department (IED): (i) projects, particularly those market-oriented, should have inbuilt flexibility or mechanisms to respond quickly to changing economic environments and to accommodate market volatility; (ii) early warning signals should be closely watched during project implementation to quickly reformulate project parameters to place the project back on track to meet project objectives as envisaged at appraisal; and (iii) need for ADB to address the question whether it was feasible to support market-based lending under credit lines in foreign exchange for relending in local currency loans using swap arrangements (swap arrangements were not freely available and were expensive) to meet housing needs of low-income households (LIHs). Questions also arose in this regard on issues such as affordability, high intermediation costs, and difficulties of assessing risks. Perhaps, a more prudent approach could have been to address policy and institutional reforms through the program-based lending modality to strengthen institutions and policies to facilitate a greater availability of resources, and easier access thereto, on a sustainable basis, for meeting LIH housing requirements. The project completion report (PCR) also identified useful lessons, particularly on the need for products such as mortgage insurance and title insurance, and for improving land titles to increase lending to LIHs and help in delinquency management.

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