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HUDCO continues to be the only organisation of its kind, dealing with the unique needs of shelter and infrastructure development with social focus, and ensuring profitable results. HUDCO, during its almost three and a half decades of existence, has extended assistance for taking up 150.93 lakh dwelling units both in urban and rural areas. In sharp contrast to the policy adopted by the contemporary housing finance companies in the fraternity, of targeting the affluent, middle and high income creamy layer of the market, HUDCO’s assistance covers the housing needs of every section of society, with special emphasis on the weaker sections and the deprived. This social orientation of HUDCO is clear from the fact that about 92 percent of the 150.93 lakh houses financed by HUDCO are for the benefit of Economically Weaker sections and Low Income catgories. |
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| HUDCO was the pioneer techno-financial institution to introduce the affordability criterion, to enable the housing solutions offered to the EWS and LIG families, acceptable/feasible. In addition to propagation, HUDCO has also demonstrated that shelter solutions within reasonable cost ceilings are actually possible, through appropriate innovations in planning, designing, technological options and financial engineering. Such innovations advocated and propagated by HUDCO are amply demonstrated in a number of low cost/low income housing projects implemented by HUDCO’s borrowing agencies such as Housing Boards/Rural Housing Boards, Development Authorities, Slum Clearance Board and Weaker Section Housing Corporations etc. Its pioneering contribution in the introduction of a special building code for low cost housing i.e. IS 8888, its significant contribution in the fields of cluster housing and low rise high density development/lay-out designs, extensive use and propagation of scientific concepts of core house, Skeletal house and Incremental housing, especially for the economically weaker sections and low income group house, are some high lights in this regard. |
| In its efforts to further its agenda of ensuring sustainable habitat development, HUDCO set up the Urban Infrastructure Finance window in 1989.Over the years, HUDCO has emerged as a market leader in Infrastructure financing as well covering both urban and rural areas.HUDCO has already extended a financial assistance of Rs 35754 crores for the implementation of 2153 projects, for a diverse basket of sectors including utility Infrastructure such as water supply, sanitation/sewerage, drainage, solid waste management, roads, bridges, transport Nagars, parts, airports etc; social Infrastructure covering educational facilities such as schools and colleges, heath facilities covering hospitals, health centers etc. and recreational facilities such as stadia, parks etc; Economic and commercial Infrastructure such as shopping/commercial complexes, technology parks and entertainment centres and industrial infrastructure.Encouraging the State Governments and institutions to promote economically viable and technologically innovative projects, assistance through Project Initialization Funds for green-field projects and ensuring sustainability and appropriate cost recovery through innovative user pay instruments, have been the hallmark of HUDCO’s enabling strategies for infrastructure development. Its pre-eminence in urban infrastructure funding in India is highlighted by the India Infrastructure Report underlining the fact that 85% of Indian institutional funding for urban infrastructure development in the country is contributed by HUDCO. |
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To
recognise need for change, resolve to change, identify instruments of change
and adopt changes in line and tune with the ever changing market and societal
environment has been the strength of HUDCO, leading to its current stability.
HUDCO has demonstrated a strong commitment to expand and diversify its
portfolios and programmes, to adequately and appropriately meet the financing
needs of the housing and infrastructure sector in India.
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1970
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HUDCO
was established under the Companies Act 1956 with an equity of Rs. 20 million
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1974
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Norms
to meet requirements of weaker sections: Introduction of ceiling costs,
revised financing pattern and cooperative housing
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1976
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Guidelines
prepared for urban & rural housing, staff housing, plotted development
and commercial schemes
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1977
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Introduction
of financing of rural housing
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1979
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Introduced
water supply /urban infrastructure schemes
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1980
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Introduced
Shelter Upgradation Scheme
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1983
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Decentralization
to Regional Offices
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1985
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Started
consultancy management services
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1988
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Introduced
Financing/ Guidelines for Village Abadi Environmental Improvement Scheme
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1989
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Issued
taxable bonds through private placement, Creation of Urban Infrastructure
Window
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1990
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Started
paying taxes and dividends
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1994
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Lifted
cost ceilings for the middle income group and high income group; Started
financing Private Sector for Commercial & Housing Schemes
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1995
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Started
Providing housing finance through NGOs
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1997
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Line
of Credit for Housing Finance Companies, Staff Rental Housing Program and
2 Million Housing Program
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1998
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Launch
of retail financing
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1999
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Initiation
of securitization initiatives
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2002
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Increase
of Authorized capital of HUDCO to Rs. 25 billion
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HUDCO
acts as the technical arm for implementation and monitoring of the governmental
programmes/initiatives of the Government of India, Ministry of Urban Employment
and Poverty Alleviation such as the 2 million housing programme, the Building
Centre Movement, Nehru Rojgar Yozana, Integrated Low Cost Sanitation programme
(ILCS), Valmiki Ambedkar Awas Yojana (VAMBAY) including Nirmal Bharat Abhiyan,
and the Night Shelter scheme. The subsidies available from the Government
for these schemes are dovetailed with HUDCO’s loans available for the same
purpose, and the dovetailed funds are on-lent to the implementing agencies
in all the States/UTs, by HUDCO. HUDCO appraises and monitors the schemes/programmes
on behalf of the Government. HUDCO is also assisting the Government in
the development of MIS for effective implementation and monitoring of the
programmes, for training the officials of borrowing/implementing agencies,
for dissemination of information, and also for developing economic design
solutions.
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HUDCO’s
role in setting up a national network of Building Centres with the aim
of at least one building center in each district has received acclaim in
India and Abroad. HUDCO has so far sanctioned 584 urban BCs covering 405
districts out of total 584 districts in the country with grant assistance
of Rs.22.48 crore. HUDCO has also sanctioned 80 BCs in rural areas with
grant assistance of MoRD. These building centres help impart training to
unemployed and unskilled in construction trades, they produce building
materials and components and also undertake housing and infrastructure
projects, demonstrating the use of cost effective, disaster resistant and
innovative building materials and technologies. Further, in line with the
UPA Government’s Common Minimum Programme, the Building Centre can contribute
in generating employment opportunities for a large number of construction
workers by upgrading their skills through training in masonry, petty-contracting,
bar-bending, carpentry, brick making etc. The experience of the Building
Centres Movement launched by HUDCO could become a launching pad for the
above objective of creating large scale employment.
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HUDCO,
being sensitive to the concerns of heritage conservation in the urban fabric
of the country, has taken the lead in undertaking several initiatives in
this regard, including financing the retrofitting of heritage houses in
Ahmedabad. HUDCO is also providing assistance to the Ministry of Tourism
and the Ministry of Culture in planning and urban improvement of several
heritage areas all over the country. These include preparation of a heritage
led development plan for Bodhgaya, preparation of area improvement projects
for World Heritage sites of Mahabalipuram, Hampi, and Ajanta. Works for
several other heritage sites such as the Buddhist circuits are on the anvil.
HUDCO has also tied up with the Japan International Cooperation Agency
(JICA) for the improvement of Manikarnika Ghat at Varanasi. HUDCO’s role
in this socially relevant sector is one of the thrust areas.
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HUDCO has set a tradition of spontaneous support and assistance for the rehabilitation of the natural calamities affected, be it due to earthquakes, cyclones, landslides, floods or the most recent tsunami, in various parts of the country. In addition to soft loan assistance for reconstruction, repair and retrofitting of the damaged housing stock as part of the rehabilitation efforts, HUDCO’s assistance is also extended for rehabilitation of the damaged infrastructure. In addition, the technology assistance package also covers technology backup support and guidance through extensive printing and distribution `Do’s and `Don’ts’ brochures on natural disaster resistant construction practices in local languages; setting up of Special Building Centres in natural disaster affected areas which act as technology transfer instruments for disaster resistant construction, putting up of disaster resistant Demonstration units, and also by adoption of Model Villages/Model Bastis for demonstrating the integrated inputs of planning, design, use of non-conventional energy sources etc. HUDCO’s techno-financial assistance has so far been extended for disaster relief in earthquake affected areas of Latur, Uttar Kashi, Jabalpur, Chamoli and Rudraprayag regions and Gujarat, cyclone/flood affected areas of Orissa, Tamilnadu, Andhra Pradesh, Kerala, etc. |
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Initiatives
towards ensuring project sustainability through innovative practices have
been the hall mark of HUDCO. Innovative practices such as cross-subsidization,
differential interest rates, realistic cost ceilings, flexible repayment
periods, preferential allocation of resources to the socially disadvantaged,
promotion of innovative, cost-effective building materials and technologies
and innovative designs to assist the economically weaker and disadvantaged
sections, are a few which truly reflect HUDCO’s commitment to promote economically
viable projects. HUDCO has been encouraging all its borrowing agencies
to formulate financially and economically viable infrastructure projects
and has made efforts to bring about an attitudinal change and implement
reform agenda realizing the imperative need to recover the full cost of
infrastructure projects. With HUDCO’s advisory role, a number of states
and individual agencies have revised water tariffs, sewerage cess and other
user charges like toll. In a number of schemes, agencies have been encouraged
to adopt innovative cost recovery mechanisms such as levy of advance registration
charges, connection charges, development charges, betterment charges, water
tax, utilization of revenue from other sources such as octroi, property
tax, sale of plots, charges from water kiosks, etc. In the case of projects
where direct sources of revenue do not exist, indirect sources like property
tax, octroi compensation have been dedicated for debt servicing. For rural
roads, income from a related sector, i.e. agriculture cess has been earmarked
for debt repayment.
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The
urban local bodies often lack comprehensive expertise to undertake design
and development of projects and its implementation As of now, there is
no institution at the national level which could guide and assist the urban
local bodies towards effectively undertaking the developmental projects
and improving their organizational, financial and technical capabilities.
Though the 73rd and 74th amendments have extended
substantial powers to the urban local bodies, they continue to remain weak
and unable to exercise the powers conferred on them. HUDCO is trying to
fill the gap by imparting the necessary training and nourishing the urban
local bodies in fulfillment of their assigned roles.In the years to come,
HUDCO would identify institutional mechanisms of urban local bodies as
focal areas in its operations.
Towards capacity building of the stakeholders of the sector, the HSMI as the Research and Training division of HUDCO, promotes capacity building of the professionals engaged in the Sector, including HUDCO borrowing agencies, local bodies, NGOs, private sector Housing Finance Institutions etc. HSMI is also the nodal institute on behalf of Ministry of Urban Employment & Poverty Alleviation, to coordinate various training and documentation activities under Information, Education and Communication (IEC) component of Swarna Jayanti Shahari Rozgar Yojana. HSMI also conducts long duration International Training Programmes on Urban Development Management and Urban Planning and Management every year. HUDCO would continue to take initiatives for the capacity building of personnel in urban local bodies in strengthening their capabilities for effective delivery of housing and urban infrastructure services. HUDCO is also proposing to take up real estate projects jointly with urban local bodies for development of inner city areas for redevelopment/renewal as a joint venture with urban local bodies for mutually profitable projects. HUDCO would also, in association with the urban local bodies, put up demonstration projects for showcasing the use of innovative, cost effective technologies for its replication. |
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HUDCO
had been supported significantly by the Govt. in the initial years towards
meeting its social commitments, which however, was progressively withdrawn.
During 1970-85 Government’s Direct Interest Subsidy support to HUDCO for
its social operations and Income Tax and Dividend payment exemption were
made available however, Interest Subsidy for its lending to EWS/LIG was
withdrawn from 85-86, the Income Tax Exemption was withdrawn from 90-91
and exemption to payment of Dividend was withdrawn from 91-92. Post 1991-92,
HUDCO continues to honour its commitment towards the EWS/LIG on its own
under severe strain, with increased market orientation of Resources.
HUDCO as an institution has been borrowing from the market without any financial or physical incentives and has been able to fulfill its role by stimulating the debt market. To be able to effectively meet its social commitments, HUDCO has to remain a profitable entity for being able to raise resources from the market at competitive rates. Towards the same, HUDCO has turned out profitable results continuously ever since its inceptions and its profitability is growing over the years. HUDCO has also been paying out dividends to the Government. ‘Profitability with Social Justice’ has been the motto of the organisation and HUDCO is poised to continually move with it, in line with its Corporate mission to promote sustainable habitat development to enhance the quality of life for habitat development. HUDCO, on its part, has been actively supporting the implementation of several action plan schemes of the Government of India as its nodal agency. In respect of number schemes such as VAMBAY, ILCS, Night Shelter, 2 Million Housing Programme, Building Centres, etc., HUDCO’s role has been substantial in the successful implementation of these schemes. As part of the HUDCO’s social obligation, HUDCO would continue to extend its nodal role in implementation of such schemes as an extended arm of the government. |
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Inspite
of its long existence, long credit history and radical reform orientation
in tune with times, HUDCO, in the post reform era is facing critical concerns.
This include , (a) exposure to competitive environment, calling for a radical
change in the orientation of the workforce as well as better efficiency
and skills in appraisal & mobilisation/deployment of resources, (b)
reduced support of government by way of subsidies and guarantees warranting
innovative project structuring and innovative financing instruments, concession
instruments and risk - coverage instruments.
In this context, there is a need to review and reconsider the role of HUDCO in its traditional operational areas and also dwell into the new/potential areas of operations in future. The vision for future necessitates a revisit to the traveled tract for its suitability and applicability and the need for changes in the approach, method and performance parameters. |
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In the light of its unparalleled history, growth and performance, HUDCO would continue to play the role of a leading techno-financial institution meeting the requirements of housing and urban development both in rural and urban areas.The specific focus areas are outlined below:
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As
reviewed in the earlier paragraphs, HUDCO has emerged as the single largest
Institution meeting the housing requirements of all categories of population
in the country as of now, and also ranks among the largest facilitators
of housing delivery in the world. As per Census 2001, the housing shortage
in the country stands at 31.1 million. Of this, a substantial proportion
is estimated to be to meet the requirements of weaker sections and low
income groups in the rural and urban areas. Financing of housing projects
for the weaker sections and low income groups do not give competitive rate
of return, and as such fail to attract adequate private investment.
As of now, there are 46 recognised HFCs in India. Commercial Banks also have been lending for housing more actively in the recent past. The quantum of housing finance provided by these institutions has grown by 30-40-% over the last 2-3 years. However, the reach to the poor has been marginal. The HFCs and CBs mainly cater to the Middle and higher income group categories of population. As per the latest RBI report on Trends and Progress, although scheduled Commercial Banks as well as housing finance companies have led the robust growth in credit to housing sector since the late 1990s, but the housing needs of the poor and low income groups have remained unaddressed. It is precisely this unmet need which makes HUDCO’s role and relevance more significant. With more than 55% of its entire housing portfolio funds utilised for supporting the weaker section and low income category, HUDCO proved to be only institution of this kind in the country. With the increasing shortage of housing and declining quantum of financial support from other financing institutions, it is only HUDCO which could be relied on for its comprehensive techno-financing and affordable assistance for ensuring the housing delivery in India. HUDCO needs to continue its services for providing housing finance both at bulk and individual level. Thus, HUDCO’s role in housing finance sector would be strengthened further in the years to come, leveraging its existing skill base in project finance, to become a one-stop shop offering comprehensive advisory and funding services. |
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The
India Infrastructure Report has outlined the substantial requirement of
funds for providing basic infrastructure requirements in the urban areas.
Particularly huge is the quantum of requirement of funds for supporting
the utility infrastructure facilities which are not commercially viable
- the ROR being too low to attract private investment. Most ULBs cannot
raise resources from the market or through user charges to pay for the
capital outlay on these services. HUDCO is one of the very few agencies
extending long term financial assistance to the ULBs and other para-statal
agencies, at affordable cost. As per the Rakesh Mohan Committee Report
HUDCO’s share in financing of urban infrastructure was as high as 85%,
and of late, a few more FIs including Commercial banks have been lending
for water supply, transportation infrastructure (roads/bridges) projects,
etc. The quantum thus extended has often been marginal, and is in the form
of residual investments rather than on a regular pattern. The commercial
banks have treated such funding more as an interest earning proposition,
rather than project funding based on technical appraisal of the projects.
Further, such lending has been either for short or at the most for a medium
term (5 to 10 years), rather than for a long repayment period (15 to 20
years) which is the requirement for non-remunerative infrastructure projects
which generally have a long gestation period. While recovering the on-lent
funds has been the primary concern of other lending institutions, HUDCO
has been emphasizing on incorporation and implementation of a reform agenda
comprising use of updated technologies, innovative user pay instruments
for economic viability of the projects, and effective monitoring system
for improved maintenance processes.
It is in the above context of the sustainable and healthy growth of the infrastructure sector in the country, that HUDCO need to continue its funding for infrastructure development. |
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In
view of the substantial gap between the demand and supply both in housing
and infrastructure requirement, the issue of adequate provision need to
be addressed through a concerted and comprehensive approach, involving
all the stake-holders in the delivery. Thus, there is a need to involve
as many possible institutions of both formal and informal nature in this
process. Availability of funds, internal technical stability – of processes
and systems – of project conception, implementation and monitoring, all
form important requirements in the delivery process. A number of institutions
at the State level such as police housing corporations, slum clearance
boards, cooperative housing federations, etc. are involved in housing delivery.
A concerted and consistent effort needs to be made for guiding their growth,
promoting corporatisation initiatives, undertaking capacity building initiatives,
offering consultancy for project conceptualization, project development,
project financing, project implementation, project monitoring and post
completion assessment/evaluation studies mechanisms, etc., for ensuring
a healthy and dynamic growth of the housing and infrastructure development
institutions. In the present national level context, such an effort and
assistance could be possible only through HUDCO. Further, HUDCO would also
encourage implementation of a reform agenda including restructuring, corporatisation,
introduction of double-entry accounting systems/procedures, tariff rationalisation/regulation,
use and adoption of innovative cost recovery mechanisms, etc. In-situ provision
of essential facilities in rural areas towards development of integrated
settlements with appropriate urban facilities would be a focus area for
HUDCO in its future activities.
Recognising the fact that HUDCO is only as strong as its borrowing agencies, HUDCO would continue to impart great impetus to their capacity building efforts to effectively address the housing delivery requirements. Towards the same, HUDCO’s training capabilities would continue to be strengthened so as to meet the increasing requirement. |
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The
role of securitization and development of a secondary debt market in the
housing sector for promoting a vibrant and dynamic housing sector is being
well recognised in the recent past in India. Attempts have also been made
by NHB, HDFC etc towards the same recently. Towards promoting a higher
liquidity in the market, HUDCO would examine setting up of a mortgage backed
security entity to facilitate the process. This would be attempted by supporting
housing finance companies, taking initiatives by creating security papers
which are of investment grade, and by enlisting/encouraging investments
by institutions having long tenure funding sources such as pension funds,
provident fund, banks, etc. HUDCO also envisages that this kind of market
which has slowly developed in mortgage backed securities would improve
the growth in the asset backed securities. This would also help in the
investors identifying it as a secured investment with adequate profitability.
There is a lack of players in the Indian housing and infrastructure finance
market which enables a market for mortgage backed securities.
HUDCO would be an ideal institution to undertake this endeavour in view of its long existence, variety of portfolios, and long credit history. |
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Traditionally,
HUDCO had a monopoly as far as funding the State Governments and their
agencies for their housing and infrastructure programmes. The increasing
entry of a number of players in the field, having access to lower cost
resources, during the last few years, has put HUDCO’s spread under strain.
Even the NHB, HUDCO’s regulating agency, has become a competitor. Such
developments make it difficult for mono-line players like HUDCO to remain
profitable in the industry, making it imperative for HUDCO to charter a
way forward.
In this scenario, HUDCO would need to develop new products, appropriately packaged to meet the variety of requirements of its borrowers, and also venture into new areas to sustain its market as well profitability. This would enable HUDCO to continue to sustain its social commitments towards housing for the poor and provision of utility infrastructure – HUDCO’s focal areas since inception. The new areas identified includes development of new townships, growth centres/corridors, commercial complexes/HUDCO Haats, Habitat Plazas etc. based on the concept of joint ventures with the State Governments/agencies/joint and private sectors. This would be greatly successful in view of its brand image, availability of technical and financial resources, availability of in-housing design capabilities, multi-disciplinary/experienced professionals in the field of project formulation and project management, and an excellent network of Regional Offices for effective monitoring. In such Joint Ventures, HUDCO would have a comparative advantage over the other operators in the sector in terms of quality, cost effectiveness and consequently the affordability of the ultimate product. HUDCO has already taken bold and giant steps in this direction by entering into new and diverse sectors, such as the Telecommunication Sector. HUDCO has also developed innovative/non-asset backed security packages and instruments, for funding such sectors and other BOT projects that are not backed by any physical assets. HUDCO has also been participating in the funding of mega projects such as Ports, Airports, Expressways, Telecom projects, SEZs Hotels, Multiplexes etc., with other FIs and Banks, on consortium basis. In addition, HUDCO’s traditional expertise in Project Appraisal would be capitalized on a large scale as a fee based activity. Participation in large green field projects in consortium with other FIs/Banks, based on its technical appraisal capability would be an added advantage. HUDCO would strengthen its existing service offerings and aim to offer comprehensive, advisory, funding and other value added services. This could be bundled with the funding cost to provide a one-stop-shop and improve HUDCO’s margins. HUDCO would also undertake documentation of best practices and involve itself in introduction and advocacy of innovative planning, designing and development best practices. It would also take up demonstration projects (disaster affected areas, slum improvements, urban renewal and redevelopment, innovative water management practices such as rain water harvesting and waste water recycling development of model villages and bastis etc). HUDCO is confident in cruising through the current concerns through leveraging its core competency by adopting a pragmatic approach towards reaching its Corporate Goal of achieving an annual profit of Rs. 1000 crores by the year 2008-09 keeping with its focus on its social orientation |