Letter of Intent Essay Example | Topics and Well Written Essays - 500 words - 1

Letter of Intent - Essay Example Having achieved Magnet designation and being recognized as a National Cancer Institute Cancer Center and an exceptional Level 1 Trauma Center, I am fully aware that the University of Virginia Health System has been known to have established profound commitment to community service and devotion to leadership in healthcare and research. To align with this sense of mission, I would like to be identified with its continuous drive toward innovation and excellence to ensure the highest quality of care attainable. I long to adequately take part in significant changes that make the pharmacy department up-to-date in meeting current demands as impressive as the ongoing hospital expansion. If possible, I look forward to pioneering a much-improved patient care, one that goes with deeper levels of enthusiasm and compassion, thereby surpassing traditional expectations. I also feel strong about plans for new pharmacy model as to engage them at depth, imagining the flexibility I would enjoy having t o work with almost the entire clinical staff upon rotation within multidisciplinary teams. After thoroughly speaking with Scott Joiner and Dr. Stephanie Mallow-Corbett regarding the opportunities at the University of Virginia Medical Center, I am convinced with utmost sincerity that these potentials are well-suited to be carried on here as I proceed to seek further growth in fulfilling my responsibilities as a registered clinical pharmacist. I do believe that this position makes an ideal opportunity to collaborate with peers who would be interdependently capable of helping me continue to strengthen applicable analytical skills, entertain difficult tasks and willingness to discern new set of values and skills in keeping up with development and advances intended for pharmacotherapy under multidisciplinary approach. I am confident that my knowledge, ambition, and strong leadership

Causes of Currency Crises and Banking Crises

Causes of Currency Crises and Banking Crises Introduction Based on my readings, I have found that currency crises often accompanied by banking crises or banking crises preceded by currency crises or even has no significant relationship between the two. So, why are currency crises often accompanied by banking crises? In this paper, I will discuss on how such problem may occur based on historical perspective, in which the countries that have experienced Twin Crises. The next issue is  the effectiveness and desirability of capital controls as a means by which developing countries can manage sudden capital inflows and/or outflows. This is where the credibility of capital controls are being challenged whether such restriction should be taken into a serious consideration for the policymakers to implement. It is important to analyse these economic situations due to past economic disasters in which the issues stated were significant in the 1994 Mexican peso crisis, 1997 Asian Financial crisis and the 1998 Russian financial crisis. Twin Crisis The simultaneous occurrence of currency crises and banking crises is known in economic term as Twin Crises, introduced by economists Carmen Reinhart and Graciela Kaminsky in the late 1990s. This phenomenon became a common problem in financially liberalized emerging market economies in the 1990s which started with the  1994 Mexican crisis, followed with the 1997 Asian financial crisis  and the  1998 Russian financial crisis. Kaminsky and Reinhart (1999) did an extensive research on the relationship between financial and banking crises for 20 countries and over a 25-year sample and found that banking crises often precede currency crises. The mechanism basically relies on two features. Firstly, governments hold a fixed exchange rate system and secondly, a mismatch between domestic assets and foreign liabilities by domestic banks, thus, exposing to exchange rate risks( Goldstein, Itay 2005 ). A currency crises, also known as the Balance of Payment crises,is a situation in which a nation is suffering from a chronic balance of payment deficit. This problem exists when a nation is unable to finance the imports and debt repayments. The country’s central bank would be in a doubtful position whether, given the fixed exchange rate, it has sufficient foreign exchange reserves to maintain the value of domestic currency. Government often intervenes by using the countrys own currency reserves or its  foreign reserves to satisfy the excess demand for a given currency ( Wikipedia, 2014 ). It came to a period when these emerging market economies were experiencing rapid economic growth, creating massive capital inflows, which will then lead to the crises. A banking crises, however, is a financial crisis that affects banking activity which includes bank runs, banking panics and systemic banking crises, in which a country experiences a large number of defaults and financial institutions face difficulties repaying contracts. A bank run occurs when depositors believe that the bank may fail which led them to withdraw all of their deposits from that bank. This causes the banking system to be insolvent if it cannot pay its debts as they fall due. Insolvency can be defined as the inability to pay ones debts. Cash flow insolvency, or a ‘lack of liquidity’ may occur as well when the bank might end upowingmore than itowns or is owed ( postivemoney.org, n.d ). Twin Crises started off when investors begin to lose their confidence as the massive capital inflow in the country creates uncertainty among investors in which the debt their capital is generating. The country’s currency will be at stake as the resulting outflow of capitals created by investors as they withdraw all of their funds will devalue the affected nation’s currency. Firms of the affected nation who have received the inbound investments and loans will suffer, as the earning of those firms is typically derived domestically but their debts are often denominated in a reserve currency ( Kallianiotis, 2013 ). Once the nation has exhausted its foreign reserves trying to support the value of the domestic currency, government can raise its interest rates to try to prevent from further decline in the value of its currency. While this helps those with debts denominated in foreign currencies, it generally further depresses the local economy as high interest rate usually enc ourages saving and discourages investment. Real-World Financial Crises The 1997 Asian financial crisis was a period of financial crisis which affected many economies in the East Asia. It began in Thailand when they had accumulated a massive foreign debt. In the effort to support the value of baht, the government had no choice but to float the Thai baht due to insufficient of foreign currency reserves, reducing peg against the US dollar. Until 1999, economies in South East Asia enjoyed a prosperous period as they had received large inflow of money. High interest rates in emerging economies attracted many investors due to the fact that it may give a high return for the investors. As a result, price of assets in these countries began to rise at an alarming rate which created insecurity among investors. Lenders started to withdraw all of their funds at a large scale, creating credit crunch and bankruptcies. Furthermore, there was a depreciative  pressure on their exchange rates as the supply of currencies of the crisis countries was high in the exchange market. Governments from these countries had to intervene in the exchange market. To prevent any loss in value of domestic currency, they had to raise domestic interest rates by buying up any surplus of the domestic currency. The Mexican government’s move to devalue the peso against the US dollar created an outburst which led to the Mexican peso crisis in 1994. In order to maintain in the value of peso, the Mexico’s central bank allowed the peso to free float within a narrow band against the US dollar through an exchange rate peg ( Wikipedia, 2014 ). Furthermore, the central bank would constantly intervene in the open market by purchasing or selling the pesos. The central banks intervention involved issuing new short-term public debt instruments denominated in U.S. dollars, using the borrowed dollar capital to purchase pesos in the foreign exchange market, will cause an appreciation in its value. Since the peso is reckoned to be increasing in value, the high purchasing power by domestic businesses, firms and consumers created an incentive to purchase more imported goods, resulting in a large trade deficit. Speculations regarding the over-valuation of peso began to circulate which encouraged investors to purchase more of U.S assets. It will be more profitable for investors as they will be able to capitalize the high exchange rate when they exchange dollars for pesos later. The resulting capital outflow from Mexico to United States caused a capital flight which put a downward market pressure on the value of peso. To curb this issue, newly inaugurated President Ernesto Zedillo in 1994announced the Mexican central banks devaluation of the peso between 13 and 15 percent. Due to the unpredictability of Mexican policymakers, investors felt insecure and afraid of further devaluations in the currency, putting an upward market pressure in the interest rates and a further downward pressure on the value of peso. Foreign investors began to rapidly withdraw their capital from Mexican investments due to possible devaluation of peso. As a result, the Mexican central bank had to raise the interest rates to prevent from capital flight. Capital Flows Capital flows is simply defined as the transaction of real and financial assets and it is recorded in the capital account. When a country has a deficit in the capital account, it means the country is experiencing a capital outflow, like Japan. The country is supposedly purchasing more assets or making more loans or both at the same time, thus accumulating net claims on other countries. It is a situation in which it is undesirable to the economy. Contrarily, if the country is having a surplus in the capital account, depicting capital inflows, it is said that other countries are accumulating claims on that particular country. Capital flows provides many great economic advantages. Countries are now able to â€Å"catch-up† with the advancement of other countries by capitalizing on their differences. Capital flows enables residences of different nations to invest in other countries by engaging in inter-temporal trade, allowing them to reap benefits or profits for future consumption. Be it an economic boom or recession, optimum level of national consumption or expenditure is vital in every economy. Thus, capital flows helps to prevent from a fall in national consumption in case of an unexpected economic downturn, by selling domestic assets or borrowing from the rest of the world. Thus, overall improvement in economic performance can be achieved as it will aid substantially in terms of productivity and efficiency. Free capital mobility may seem desirable, though, in reality it comes at a cost. Given the exchange rate, developing countries or emerging market economies tend to acquire more assets by purchasing a massive amount of goods and services than the rest of the world. This is due to several reasons. These countries may not be on par in terms of economic performance, efficiency as well as resources compared to the rest of the world. Besides, it may be due to fluctuation in the world price of commodities. The implementation of expansionary economic policy by government will increase the demand for imports. As a result, appreciation of foreign currency will occur due to high demand of foreign goods and at the same time, a depreciation in own currency due to a low demand for domestic commodities. Since government would want to hold a fixed exchange rate regime, they can implement a contractionary monetary policy, a method of selling domestic bonds which increases the domestic interest rate, in order to maintain the value of domestic currency. The demand of domestic currency will be improved which will increase the value of domestic currency. Again, it proves to be costly as high interest rate will discourage investment, since it is now more expensive to borrow from the bank, reducing a potentially larger economic growth. This shows that free flow of capital may cause an upward pressure in the value of currency which may jeopardise local firms, making them less competitive in the global market. Emerging market economies are the usual target for â€Å"hot money† with sudden injection or withdrawal of funds, thus, creating distortion or instability in the market. Large volumes of capital inflows on search for higher yields causes dislocations in the financial system. Foreign funds might fuel asset price bubbles, encourage excess risk taking by cash-rich domestic intermediaries ( Magud, Reinhart Rogoff, 2005 ). Having a strong and independent monetary policy is more viable than sustaining free flow of capital. Due to potential harmful effects of free flow of capital to the economy, capital controls is introduced to prevent such consequences from happening. A capital control is any policy designed to limit or redirect capital account transactions and may take the form of taxes, price or quantity controls, or outright prohibitions on international trade in assets ( Neely, Christopher J. , 1999 ). Capital Controls There are two types of controls which are the controls on inflow and outflow of capital. Like Malaysia during the Asian financial crisis in the late 1990s, control on capital outflows was introduced to supposedly generate revenue, correct balance of payment deficit as well as preserve savings for domestic use. Control on capital inflows, used by Chile during the Latin American debt crisis, was used to prevent potential volatility inflows, financial destabilisation and real appreciation as well as correcting balance of payment surplus and limit foreign ownership of domestic assets. This shows various type of capital controls are targeted at specific type of movement. The question is, how effective capital control is and to what extent should it be implemented ? During the Asian Financial Crises, Malaysian government imposed controls on outflows in 1998 by pegging the exchange rate at RM 3.80 for every US dollar. Their objective was to delay from exhaustion of foreign reserves and provide as much time possible for policymakers to implement reflationary policies as well as eliminating speculation against the ringgit. Malaysia’s stock market capitalization ratio at 310 percent of GDP, compared to 116 percent in the U.S., and 29 percent in Korea and domestic debt-GDP ratio at 170 percent were, at the time, highest in the world (Perkins and Woo, 2000). In response to the crisis, Malaysian government raised the interest rates to stem the decline of the ringgit and restructured their expenditure by reducing it by 18 percent ( Ethan Kaplan and Dani Rodrik, 1999 ). However, the economy showed no sign of improvement. Their effort to reduce domestic interest rates seemed to be pointless as speculation against the ringgit in offshore markets was circulating widely. The speculation lead to the borrowing of ringgit at premium rates to purchase dollars, which created a devaluation pressure on ringgit. Worried of capital flight and further depreciation of the currency, the Malaysian government also banned for a period of one year all repatriation of investment held by foreigners. Malaysia also lowered the 3-month Bank Negara Intervention Rate from 9.5% to 8% and the liquid asset ratio was reduced from 17% to 15% of total liabilities ( Ethan Kaplan and Dani Rodrik, 1999 ). On February 15th, 1999, the Central Bank of Malaysia changed the regulations on capital restrictions, shifting from an outright ban to a graduated levy and replacing the levy on capital with a profits levy on future inflows ( Ethan Kaplan and Dani Rodrik, 1999 ). After the imposition of capital controls in 1998, Malaysia showed a strong and quick revival from the Asian financial crisis. The fact that Korea and Thailand, which had opted for IMF’s progra mme, recovered remarkably suggesting that capital controls imposed in Malaysia did not make any significant difference than the IMF’s financial aid. Chile seemed to favour controls on capital inflows and been relying on it in two different occasions (1978-82 and 1991-98). The effectiveness is questionable, however, as in 1981-82 Chile went through a currency crisis despite with controls and restrictions. The peso was devalued by almost 90 percent and a large number of banks had to be, bailed out by the government ( Edwards, Sebastian 1999 ). The controls were being reintroduced in 1991 with the objectives of slowing down the volume of capital inflows into own country, reducing the real exchange rate appreciation resulted from these inflows, allowing the Central Bank to maintain a high differential between domestic and international interest rates. In 1984, Chile has adopted a slightly flexible exchange rate system, where the peso-dollar rate was allowed to fluctuate within an upward-moving band. The authorities argued that by maintaining domestic (peso) denominated interest rates above international rates, inflation would decline gradually (Massad, 1998). This policy mix worked relatively well until the late 1980s, when Chile regained access to international financial markets, and capital began to flow into the country putting pressure both on the real exchange rate and domestic interest rates ( Edwards, Sebastian 1999 ). By early 1990, domestic firms were considerably affected, as the rapid strengthening of peso has reduced their level of competitiveness and profitability. To sum it up, the effectiveness of Chile’s controls on capital inflows has been overestimated. After the controls were imposed, the maturity of foreign debt contracted by Chile increased significantly. The evidence suggests more than 40 percent of Chile’s debt to G-10 banks had a residual maturity of less than one year ( Edwards, Sebastian 1999 ). Although the policy affected the composition of capital inflows, it did not reduce the total volume of aggregate flows moving into Chile during the 1990s. The controls on inflows had no significant effect on Chile’s real exchange rate in which it appreciated by approximately 30% during the 1990s. The controls had a short term effect on domestic interest rates. The magnitude of the effect was very small, however, raising the question of whether the central bank’s ability to undertake independent monetary policy really enhanced by the controls on capital inflows ( Edwards, Sebastian 1999 ) . Conclusion Control on inflows seems to be more favourable among authors and economists than those on outflows. Controls on outflows usually create corruption as it easier to evade than the inflows (Reinhart and Smith, 1998; Eichengreen, et al. 1999). If there is an anticipation in the depreciation of domestic currency, this creates an incentive for investors to evade controls on outflows to prevent from losses.When faced with the prospect of a major crisis, the private sector finds ways of evading the controls, moving massive volumes of funds out of the country. Controls on capital outflows have resulted in corruption, as investors try to move their monies to a â€Å"safe haven.† In almost 70% of the cases were controls on outflows were used as a preventive measure, there was a significant increase in â€Å"capital flight† after the controls had been put in place. Cuddington (1986) reached a similar conclusion in his study on the determinants of capital flight in developing countr ies. Evading controls on inflows, however, proved to be less beneficial among investors as investing in other countries would be less viable compared to domestic return. REFERENCES : L. Kaminsky, Graciela and M. Reinhart, Carmen (1999) The Twin Crises: The Causes of Banking and Balance-of-Payments Problems Vol. 89 No. 3 Online at :  http://home.gwu.edu/~graciela/HOME-PAGE/RESEARCH-WORK/WORKING-PAPERS/twin-crises.pdf Accessed 20 December 2014 Goldstein, Itay (April 2005) Strategic Complementarities and the Twin Crises Economic Journal. Online at :  http://www.res.org.uk/details/mediabrief/4392181/Explaining-Twin-Financial-Crises.html  Accessed 20 December 2014 Tornell, Aaron (2002) Twin Crises The National Bureau of Economic Research Online at :  http://www.nber.org/reporter/winter02/tornell.html Accessed 20 December 2014 J. Neely, Christopher (1999) An Introduction To Capital Controls Online at :  http://research.stlouisfed.org/publications/review/99/11/9911cn.pdf Accessed 27 December 2014 Baba, Chikako and Kokenyne, Annamaria (2011) Effectiveness of Capital Controls in Selected Emerging Markets in the 2000s IMF Working Paper Online at :  https://www.imf.org/external/pubs/ft/wp/2011/wp11281.pdf Accessed 27 December 2014 Edwards, Sebastian (1999) HOW EFFECTIVE ARE CAPITAL CONTROLS? The National Bureau of Economic Research Online at :  http://www.nber.org/papers/w7413.pdf Acccessed 27 December 2014

Lord of the Flies: Irony :: Free Essay Writer

Lord of the Flies: Irony William Golding, the author of Lord of the Flies, used irony to tell his story of a group of young British boys stranded on a deserted island. The readers can clearly spot the irony in the dialogue and Ralph, one of the main character, is also aware of the irony in his situation. The irony in the novel forces the readers to step aside and think about the hidden meanings the author is trying to express. The first example of irony occurred in chapter two. Jack says to the group of young, impressionable boys that "We’ve got to have rules and obey them. After all, we’re not savages."(Golding 32)However, in the following chapters Jack is the leader of the tribe and encourages the boys to forget civilization and act upon their primitive instincts. They ignore the laws that they all have agreed to follow while on the island and commit heinous crimes against humanity, such as torture against both humans and animals, and murder. They no longer act like English schoolboys who are the best at everything, but like savages. Relatively early on in the novel Ralph comes to terms with his situation. He realizes that much of one’s life is spent just keeping out of danger and staying alive. After understanding the complex, yet realistic, view of life he remembers his first impression of the island and how he thought they would have fun on the island, like living in one of his books. Now he realized what life on the island would really be like. There is irony in Piggy’ s name. The boys hunt, kill and eat pigs on the island. Not only do they kill the pigs, they enjoy it tremendously. Piggy’ s name suggests that he will be a victim of the beast. Not the beast the boys on the island fear, but the beast within each of them. The author is saying through Piggy that because they kill and eat the pigs they become the beast. Ralph prays to the adult world to send them something grownup, a sign or something. His prayer is answered by a dead parachuter, a casualty of war from the fighting going on in civilized society. The dead man is powerless to help the boys. He actually causes more problems. He is mistaken for the beast and causes more fear in the boys and drives them closer to becoming savages.

Prisoner’s Education Essay

Should prisoners be allowed access to online education at community colleges?   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Distance education for prisoners is a good solution for instructional problems that were noted among prisoners. Lack of education would mean lack of the basic skills to create a better life and find a better paying job. Lack of education would mean lack of information and understanding about economics, business structure and social or community life. Failure to understand the environment will most likely result to challenge behavior. And that challenge behavior will grow to worst if one’s situation won’t change from worst to better in a given time. Access to education is very important to prisoners provided that the kind of subjects or coursework they are allowed to take will be limited and subject to higher approval.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Attitudes may change for the better but there is a big possibility that some prisoners may proved to be real problematic that a monitored coursework is better so access to education materials and information may also be limited and does not put the society or the police force at risk. It is advisable that a series of psychological test will be performed to the prisoners in order to assess and determine their potential and their ability to handle intellectual programs like distance learning. Internet access must also be limited to the sessions and all the homework will be done at the library of the correctional facility. Proper monitoring eliminates any potential risk in the system.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Although there are a lot of learning and training programs provided by community colleges, prisoners access and allowed opportunities must be limited and carefully studied. The offender’s attitude can be determined on how they take the distance education delivery system. This formal education will make them earn a degree while in prison. What is important is that they get out of prison with a diploma (Wilson & Ruess 173) and is ready to face the challenges of the labor market. Lower educational level does not compel these people to commit crime but it is indeed a great factor that influenced the person’s decision making process.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   I firmly believed that prisoners are victims of their own environment and experiences. People and environment interaction have the ability to make and unmake people. Education will attempt to enhance basic skills and their ability to learn and assess certain situations that may be good or detrimental to their being and the well being of their community. Know that a person of limited options has much to tackle within himself in terms of self confidence or low regard to self, frustrations to alleviate life and the absence of voice in society. A person who does not understand the pathology of addiction and experience what acceptance to society and good life is will never grasp the meaning of being good to live a good life. He does not have any idea of what a good life is. He was so used to being bad he does not even know the meaning of good.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Yes, for me prisoners need to be given the chance to access distance learning education in a limited coursework and selected programs that involves no risk at all. Police work or study of law is simply a no go or they may be able to study the system well. Prisons and correctional institutions should take advantage of technology to educate their prisoners. Technology has just given correctional institutions a very flexible and easier channel for the education of its prisoners. The only way to bring a nation down is to stop educating its people. The only way to improve the economy of a nation is to begin educating its people and giving them the skills needed and required by the labor workforce.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   I am certain that education is not to be regarded as their second chance. Education is to be regarded as the responsibility of the state and the community to help the person obtain the basic skills for survival and obtain comprehensive knowledge that will make him understand life, society and morality. The No Child Left Behind Act was very effective. Well then let us consider those who were already an adult when the Act was initiated. We are not to leave behind any member of the community. We are not to disregard their needs and discriminate them because of their challenge behaviors. They are a challenge to the state and to the society. And the only way I find that will bridge the gap of talking between an uneducated man and a moron is education. It helps sharpen the intellect to understand policies, law and their moral obligation to safeguard the well being of other people.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   We eliminate an enemy of the state by providing a structured online education. Structured is not brainwashing, structured means appropriateness of the courses that they are allowed to avail. Prisoners of higher age who are not adept to technology may be taught on how to make wise investments online. The process may be simpler and they only have to study the market fluctuations. Teach them to be entrepreneurs and keep them busy with school work. The key is teaching them to adapt the new lifestyle behind bars. Education is an opportunity for change not only for the prisoners themselves but for the state. This way the state will be able to increase the population of its professionals even behind bars. Society is not to condemn prisoners but they are to help them out of compassion. Negative reactions would mean no acceptance and outright denial of their ability to seek for a better life. Negative reactions solicit rebellion and feeling of abandonment which will result to commission of more crimes. I certainly agree that the only way to eliminate crime is to educate the person committing the crime. Works Cited Page Wilson, David and Ruess, Anne. Prison(er) education: Stories of change and transformation.   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Winchester, UK: Waterside Press, 2000.

The Development of Housing Finance in the Changing Business Scenario

THE DEVELOPMENT OF HOUSING FINANCE IN THE CHANGING BUSINESS SCENARIO Mr. P. S. Ravindra** ABSTRACT Traditionally in India, most people used to depend on their provident fund and gratuity amounts received after retirement while considering buying a home. However, with the emergence of housing finance as a major business in the country, an increasingly large number of people are going for housing loans. The housing sector in India is facing an estimated shortage of 4. 1 crore houses and according to the Ninth Plan, the demand-supply gap in urban housing is 3. 3 crore houses. The industry comprises of nearly 383 housing finance companies although disbursements from only the leading 26 institutions are eligible for re-finance from National Housing Bank, which is the regulatory body for these companies. These Housing Finance Companies (HFCs) constitute nearly 95 % of the total disbursement by the industry . The tax exemption on the interest paid on housing loans has also been extended up to the year 2003. This move will benefit the salaried employees, especially the middle-class populace. A dream of providing 25 lakh rural houses has been envisaged in the budget. Out of these, 12 lakh houses will be built under the ‘India Awas Yojana’ and another one-lakh houses would be provided under the ‘Credit-cum-Subsidy’ scheme for families with an annual income below Rs. 32,000. Moreover, around 1. 5 lakh houses to be constructed under the ‘Golden Jubilee Rural Housing Finance Scheme’ will be eligible for refinance from the NHB. The industry is witnessing a boom at present boosted by the generous budget sops and rock bottom real estate prices. The demand is a result of genuine individual needs for housing. The prospects of the industry would be further strengthened on the amendments to the Rent Control Act and repealing of the controversial Urban Land Ceiling Act. This research paper focuses on the Demand for Housing sector, Market Profile, Market Trends, Price Sensitivity factors and outlook of Development of Housing Finance in the changing Business scenario. ____________________________________________________________ ____________ _________________nd Ceiling Act. _________________________________________________________ THE DEVELOPMENT OF HOUSING FINANCE IN THE CHANGING BUSINESS SCENARIO Mr. P. S. Ravindra** Introduction Roti, Kapada aur Makaan are the three basic necessities of human beings. Traditionally in India, most people used to depend on their provident fund and gratuity amounts received after retirement while considering buying a home. However, with the emergence of housing finance as a major business in the country, an increasingly large number of people are going for housing loans. Incomes of families are rising and their purchasing capacity as well as loan repaying capacities is going up. Property prices are more or less on a stabilizing trend. A large number of home loan options are available. HFCs are becoming increasingly liberal. Interest rates have been progressively falling. The Government of India has been giving substantial encouragement to the housing sector. The social structure of the Indian families is going through a sea change as the joint family is fast giving way to the nuclear family concept. The pressure to have one’s own home is high among these families. Highlights †¢ Significantly, there has been no dearth of demand for housing and consequently for finances for the same have been abundant. †¢ Market dynamics play a pivotal role in determining the lending rates. Considering the same, the housing finance industry has been in a slump in recent times. †¢ The entry of banks into the housing finance sector has posed a serious threat to already existent players in the field. †¢ The housing sector is witnessing a clash between major players. Foremost amongst this is the ICICI and HDFC imbroglio. The later is giving sleepless nights to HDFC. †¢ Tax sops provided by the Government of India is a significant step towards upholding the future prospects of this industry. Sector Comments Nearly 25 lakh houses are built every year in India. However, the nation’s requirement is around 65 lakh houses per annum. The housing sector in India is facing an estimated shortage of 4. 1 crore houses and according to the Ninth Plan, the demand-supply gap in urban housing is 3. 3 crore houses. In case, all these urban housing dwellings were to be built, it would require an investment of Rs. 150,370 crore. Traditionally, the housing finance business has been yielding a margin of around 2 per cent. The skill of the players is in converting their advances that have a maturity period of 15-30 years with the deposits that mature within three years. Though, the National Housing Bank (NHB) refinances housing loan up to Rs. lakh disbursed to the lower income group, this is just a negligible proportion of advances to the major players. The primary sources of funds are fixed deposits, debentures, private placement of bonds and borrowings from banks and financial institutions. Thus, efficient financial management has a key role to play in this industry. Lending rates are predominantly market-driven and in view o f the same, the housing finance industry has been in a slump in recent times with there being low demand from builders and investors alike. Furthermore, the entry of banks into the housing finance sector has also not augured well for the industry. Most housing finance companies cater mainly to the higher income group having reasonably assured creditworthiness. In a scenario marked with the absence of speedy foreclosure regulations, most companies prefer to stay away from rural and the Low-Income Group   (LIG). However, it must be noted that demand for housing in the Middle-Income Group and High Income Group segments has also recorded a steady rise lately. Market profile The Indian housing finance sector is crowded with players of all sizes and nature: government organisations, insurance companies, banks, housing finance companies and co-operative organisations like HUDCO and NHB. Major players in the Industry are HDFC, LIC Housing Finance, Dewan Housing, Can Fin Homes, SBI Home Finance and Gujarat Rural Housing. The youngest entrant into the Industry, which is penetrating rapidly, is ICICI. Interestingly, both Can Fin Homes Limited and its parent Canara Bank are into housing finance. It is the same with quite a few banks, for example, SBI and SBI Home Finance Limited, Bank of Baroda and BOB Finance, Vysa Bank and Vysyabank Housing. Though HDFC and ICICI also have their banking arms, they compete with each other in personal loans, but not housing loans. The industry comprises of nearly 383 housing finance companies although disbursements from only the leading 26 institutions are eligible for re-finance from National Housing Bank, which is the regulatory body for these companies. These Housing Finance Companies (HFCs) constitute nearly 95 % of the total disbursement by the industry. However, owing to the slump in real estate market over the last few years, the industry posted a fairly low disbursement growth. Market trends The housing sector is witnessing a clash between major players. HDFC had ruled this sector with a lion’s stranglehold. It was smooth sailing for HDFC all these years and it seemed that its monopoly was there to stay forever. However, out of the blue emerged ICICI Home Loans, when this financial institution decided to clash arms with HDFC on its home front. Within a year of its launch, ICICI Home Loans is giving the industry leader, HDFC, sleepless nights. Undercutting in the interest rates is all in the game and so is every other trick in the book. HDFC is gathering its wits to beat its competitor at its own game. It launched an aggressive hoarding campaign designed in the style of ‘follow the leader’. HDFC has launched its website propertymartindia. com as a joint venture with the Mahindras. Following suit, ICICI too, launched its home portal indiahomeseek. com. So the war rages on both at the retail level and also in the form of a cyber war. ICICI has lowered its prime lending rates on short and medium term loans from 13 per cent to 12. 5 per cent. Thus, bringing the interest on housing loans at par with the foreign exchange loans. HDFC also reduced the interest rates on its housing loans from 13. 25 per cent to 13 per cent. It went an extra mile to woo the borrowers of loans up to Rs. crore by allowing them the facility to either opt for a fixed interest rate of 13 per cent or a floating interest rate of 12. 5 per cent. As the name indicates, a borrower opting for the first choice will have to repay the loan at an interest rate of 13 per cent irrespective of any future hike or cut in the rates. Those choosing the second option would be subject to the vagaries of the interest mar ket and may gain or lose in the bargain. The company has also reduced the interest on loans borrowed by non-resident Indians. These loans repayable within five years will attract an interest rate of 11. 5 per cent per annum while loans ith a term of 6-10 years will be charged interest at 12. 5 per cent. The above rates are under the fixed interest rate option. Similar floating rate loans would be charged at 5 per cent less interest. Originally, only the commercial banks offered housing loans on floating interest rates, now that HDFC is offering loans at a 12 per cent floating rate, ICICI also has a floating rate home loan in the pipeline. Price sensitivity factors †¢ Noteworthy fact here is that NHB refinance to the HFCs comprises a mere 7% of the loans disbursed. In other words, most HFCs have to arrange for a major part of the disbursals from their own resources. Thus, low spreads, mismatched asset and liability, competition posed by banks with recent regulations requiring commercial banks to invest 40 per cent of their advances towards the priority sector, etc. pose problems for the lending division. †¢ The first housing finance company to cut down its interest rate after RBI slashed the PPF interest rate by 1 per cent on January 14, 2000 was HUDCO. When the National Housing Bank, the refinancing agency of all housing finance companies, slashed its rates by up to 50 basis points, it triggered off a virtual interest war in the industry. HDFC, ICICI, LIC Housing Finance, PNB Housing Finance Limited and a host of others followed suit. In a game of one-upmanship, the companies have been vying with one another to offer the best deal in a rapidly growing market. †¢ CRISIL has forecast an increase in the interest rates in the second half of this year. This will be due to the demand of funds by the Centre and also the corporates exceeding the supply. The Central Government has projected a Rs. 31,000 crore higher borrowing this year than last year’s figure of Rs. 86,000 crore. The State Government borrowings would add up to a further Rs. 7,500 crore and the corporate demand would be higher by Rs. 11,000 crore. As compared with the supply, CRISIL expects the short fall to be around Rs. 15,800 crore. To make up this short fall, even if there is a 1 per cent cut in CRR, interest rates are still bound to increase. †¢ The Union Budget 2000-01 has given a shot in the arm to the industry by raising the exemption a pplicable to individual borrowers on the interest paid on housing loans to Rs. 1 lakh. The existing tax rebate of 20 per cent under section 88 of the Income tax Act of 1961, covered repayment of housing loans, subject to a maximum of Rs. 0,000. The same has now been doubled to Rs. 20,000. This, coupled with the lowering of the interest rate would enable a borrower to enjoy tax exemption upto a loan of Rs. 7. 5 lakh for a 15-year term. He can now have access to better tax planning options on account of the exemption and a lower Equated Monthly Installment (EMI) due to longer term of repayment. Furthermore, individuals who already own a house can now invest in a new house and yet claim exemption from capital gains on the sale of the asset. The tax exemption on the interest paid on housing loans has also been extended up to the year 2003. This move will benefit the salaried employees, especially the middle-class populace. A dream of providing 25 lakh rural houses has been envisaged in the budget. Out of these, 12 lakh houses will be built under the ‘India Awas Yojana’ and another one-lakh houses would be provided under the ‘Credit-cum-Subsidy’ scheme for families with an annual income below Rs. 32,000. Moreover, around 1. 5 lakh houses to be constructed under the ‘Golden Jubilee Rural Housing Finance Scheme’ will be eligible for refinance from the NHB. The industry has found new avenues such as securitisation, which are expected to be launched in the market very soon. This mechanism would require a pool of assets (mortgages), which would be sold by the HFCs to NHB. These assets in turn would act as a Special Purpose Vehicle (SPV) and would be sold as pass through certificates to investors, which initially would be from groups earning pension funds, mutual funds, financial institu tions, commercial banks and other trusts or institution which require monthly fixed income. The mortgages would be for loans up to a period of 10 years, on which HFCs would earn 16 % from borrowers. The spread is to be passed back to the concerned HFCs in the form of premium at purchase of mortgages or service charge over a period of time. It is expected that with the success of securitisation the circulation of funds would increase coupled with cash flows generated by these funds. Furthermore, a secondary market for mortgages would become feasible for HFCs. Outlook The industry is witnessing a boom at present boosted by the generous budget sops and rock bottom real estate prices. The demand is a result of genuine individual needs for housing. The prospects of the industry would be further strengthened on the amendments to the Rent Control Act and repealing of the controversial Urban Land Ceiling Act. Thus, the housing finance industry is on solid ground and has interesting prospects ahead. As for the small players, they will have to take the harsh decision to either exit the industry or merge with bigger entities. It is also amply clear that in the future, industry leader HDFC will have to share the spoils with the aggressive young turk – ICICI. Notwithstanding the competition, the customer has nothing to lose as he can choose the best loan scheme from the ICICI and HDFC fold, with minimum interest and a nil processing fee. Conclusion Despite the abovementioned factors, several bottlenecks still exist in the industry, which have to be taken care of before any of the above can bring about an improvement in the prospects of the industry. From an overall viewpoint demand for housing is ever rising and the same would be reflected on the demand for funds. Hence, the profitability of the industry should commence on the positive track in the future. Now housing finance products are at par with other consumer goods, where use of all marketing mix has become necessary for the banks to attract and retain customers. References 1. Basu D. N and Mehta V. K. , 1993. Housing Finance System India, Urban India, XIII, (1) January-June: 36-50. 2. Manoj P. K. 2004. Dynamics of housing finance in India, 3. Vora P. P 2002. The Indian housing finance system, Housing Finance Investment. 15(Jan): 18-25. 4. Nambirajan, R, 2001. Home Loans and Tax benefits, Indian Infrastructure, May, pp. 42-43. http://www. indianloans. com http://www. indiainvest. com http://www. lichousing. com * * * * *