MARKET INFORMATION

JANUARY 2011

1. INCREASING RATES TO REDUCE REALTY PRICES

Property prices are likely to come down in 2011 making it more affordable to own a house, as
rising cost of home loans will alleviate demand and check the sharp bounce back of price after the
slowdown in 2008-09. Housing demand had increased last year after economic revival boosted
consumer confidence and banks introduced teaser rates with lower interest cost for borrowings.
Sensing better demand, builders had increased prices between 20 percent and 35 percent across
the country. This will moderate after banks pulled the plug out of such attractive borrowing
schemes and raised interest rates by about 50 basis points over the past one month. NHB, which
is awaiting $ 500 million loan from the World Bank for low cost housing, also opined that
property prices would rise in the next one-year, but that would result in correction in these rates in
all the metros subsequently.

2. NHB COLLABORATION WITH GERMANY'S KFW

Housing finance regulator NHB has entered into a 50 million euro (around Rs 298 crore)
agreement with Germany-based development bank KfW for promoting energy efficient housing
in India. The program is expected to address a niche market segment for promoting energy
efficiency in the Indian housing sector and is aimed at reducing energy consumption by 30
percent in residential projects.

3. EDELWEISS GROUP MAKES FORAY INTO HOUSING FINANCE

Edelweiss group, a financial services firm, has entered into retail housing finance business by
launching Edelweiss Housing Finance. The company hopes to capture 20 percent of the
Rs300,000 crore housing finance market over the next five years by expanding into newer cities.

4. NHB TO START MORTGAGE GUARANTEE COMPANY BY JUNE

The National Housing Bank (NHB) will roll out its mortgage guarantee company by June 2011.

5. CORPORATION BANK LAUNCHES HOUSING LOAN SCHEME FOR NRIS

Corporation Bank's new housing loan scheme for NRIs, ‘Corp Home Premium — NRI', was
launched at an NRI meet in Mangalore. A bank release said the loan is available for purchase of
ready-built house/flat, construction of house in pre-owned land, purchase of land and construction
of house thereon, and takeover of housing loans from other banks/institutions. The minimum loan
amount under this scheme is Rs25 lakh and the maximum Rs5 crore. NRIs will be given a special
‘Green Channel' facility for priority sanction.

6. HDFC AGAINST HIKE IN TEASER LOAN PROVISIONING

HDFC Chairman Deepak Parekh criticized the National Housing Bank’s (NHB) decision to raise
provisioning norms for teaser loans, saying it is steep and there is no “logic or rationale” to the
move. The housing finance regulator’s move to increase provisioning on teaser loans to 2 percent
from the earlier 0.40 percent should be applicable to fresh loans only, Parekh said.

The National Housing Bank (NHB) had asked CEOs of housing finance companies not to
encourage intermediaries but appraise projects directly. It is in the process of firming up
guidelines for intermediaries, and wants HFCs to observe due diligence and good governance
norms. It has increased provisioning to 2 percent against teaser loan portfolios.
State Bank of India, the largest lender in the country, opined that its special home loan schemes
did not fall under the “definition” of teaser loans provided by the Reserve Bank of India (RBI),
and hence it had not made any higher provisions for these loans.
Home loan provider LIC Housing Finance also sought a clarification from NHB on its
provisioning requirement on "teaser" mortgages loans-where rates are lower in the initial years
and rise subsequently.

9. HFC LOANS: NO PRE-PAYMENT CHARGES

A new NHB regulation has made it possible for homebuyers to pre-close their loans from home
finance companies without pre-payment penalties. However, the borrower has to furnish proof
that the prepayment is out of his owned funds and not borrowed funds.

In a move that will cheer millions of housing loan customers, an investigation report of the
Competition Commission of India had subsequently favoured scrapping foreclosure charges on
housing loans, which it feels obstruct competition in the banking industry. Levying foreclosure
fees is both anti-consumer and anti-competitive, a CCI report said.

10. BANKS PLAN NEW STRATEGIES FOR HOME LOAN BIZ

After winding up their teaser and discounted home loan schemes, banks and housing finance
companies, which have raised their lending rates, are charting out new strategies to expand their
home loan portfolios. Barring the State Bank of India, others discontinued special home loan
schemes since January 2011. They are currently concentrating on faster and adequate delivery of
loans. It is believed that for a home loan customer, efficient delivery mechanism is of prime
importance than marginal variation of interest rates.

11. HDFC BEATS ESTIMATES WITH 33 PERCENT RISE IN NET PROFIT

Housing Development Finance Corporation (HDFC) turned in a handsome net profit of Rs 891
crore, for the three months to December 2010, an increase of 33 percent year-on-year. With the
company maintaining its net interest margin at 4.4 percent, profits at India’s largest mortgage
lender were driven by an increase in the net interest income of 19 percent y-o-y to Rs 1,124.17
crore and a growth in the loan book of 27 percent. The company’s asset quality remained
impeccable with gross NPA at 0.85 percent of the loan portfolio.

12. LIC HOUSING FINANCE’S PROFIT INCREASES 39 PERCENT

Mortgage lender LIC Housing Finance (LICHF) also announced a profit after tax (PAT) of Rs
213.49 crore, for the quarter ended December 2010, up 39 percent year-on-year. A strong net
interest margin of 3.14 percent drove up the net interest income (NII) by 55 percent to Rs 352
crore.

13. RBI LIMITS HOME LOAN EXPOSURE OF CO-OP BANKS

The Reserve Bank of India directed cooperative banks not to give housing loans beyond 5 percent
of their total assets. State cooperative banks (StCBs) and central cooperative banks (CCBs) were
earlier allowed to extend housing finance up to 10 percent of their total loans and advances.
These banks, with exposure in excess of the new limits, have been asked to initiate steps to bring
it down to the revised limits within six months.
14. RBI'S RATE HIKE TO PINCH PROPERTY MARKET

Real estate developers and consultants said RBI's decision to hike policy rates by 25 basis points
will affect the sentiment of the property market, but they do not foresee any major impact on
housing demand and prices. Leading rating agency CRISIL expects the bank lending rates to go
up by 0.50 percent in the next few months and deposit rates to trend up by 0.25-0.50 percent as
the banks try to bridge their deposit growth gap with credit growth that is picking up pace. While
depositors are set to rake in higher returns, floating rate borrowers would have to cough up more
towards the interest component.

15. INDIABULLS PLANS TO EXPAND

Indiabulls Financial Services plans to increase its number of branches by 10 percent from the
existing 156 in FY12. At present, the Company earns a spread of 150 basis points on home loans
and 300 basis points on property mortgages. The mortgages business constitutes 71 percent of its
assets. The company earns a spread of 400 basis points each on its other three businesses namely
commercial vehicle loans, business loans and corporate loans, which constitute the remaining 29
percent of the loan book.

16. CSB BOARD APPROVES PLANS TO FLOAT HOUSING FINANCE, NBFC ARMS

Kerala-based Catholic Syrian Bank Ltd (CSB) is looking to float a housing finance arm and a
non-banking financial company, or NBFC, to improve its asset base. The bank’s board gave its
approval last week for approaching the Reserve Bank of India (RBI) seeking licenses for these
two subsidiaries.

17. CIBIL LAUNCHES CENTRALISED MORTGAGE INFORMATION

To address the need for a strong information sharing network for controlling and containing
defaults and fraudulent transactions in the housing finance industry, Credit Information Bureau
(India) Limited (CIBIL) and TransUnion recently announced the launch of CIBIL Mortgage
Check - India's first repository of mortgage information. Developed in consultation with the
National Housing Bank (NHB) and other leading industry institutions, the country's first
centralized nationwide database of mortgage information will help banks and financial
institutions share and access mortgage information, exercise stronger due diligence, and reduce
fraudulent transactions.

18. TVH LAUNCHES RS 800 CRORE RESIDENTIAL TOWNSHIP, INTEGRATED

TOWNSHIP

Leading property development firm TVH on Sunday launched its Rs 800 crore multifaceted
residential project and integrated township in Coimbatore, Tamil Nadu. The Aurora Township
offers exclusive premium villas, high-rise residences, largest mall with shopping centres and eight
screen 1600-seat multiplexes.

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