Business Model Innovation at Housing Development Finance Corporation

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The Housing Finance Market in India With the creation of the NHB, the government signaled its strong commitment to housing finance and its interest in seeing an expanded reach. It then worked with RBI and directed commercial banks to lend 1.5 per cent of all new deposits to this sector... Noticing the early success of HDFC, the Indian government started looking for ways to expand the availability of home loans. The National Housing Bank Act was passed by the Indian parliament in 1987. Established by the government as a subsidiary of RBI, the National Housing Bank (NHB) was made responsible for regulating, promoting and refinancing the housing finance sector.

HDFC was effectively the only player in the formal housing market, in its early years. Competition came from national, state and local co-operative financial institutions, who were, by all accounts inefficient and poorly managed, essentially serving as administrative channels for directed and subsidized lending for low income housing...

People had played a critical role in HDFC's success. Their skills and commitment had proved to be one of HDFC's most important assets. Yet, in its desire to develop human resources, HDFC consciously discouraged 'stars'. As a matter of policy, the company did not recruit fresh MBAs from the top-rated schools-the favorite hunting ground for most financial services companies in India. By doing so, HDFC avoided the baggage that typically came along-ego, jealousies, and an aggressively competitive environment. HDFC hired people from the next-tier institutions who tended to have more subdued personalities and were able to work jointly with others...

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