Affordable Housing: Not just a motto

Housing is not just an indicator of social well-being, but it also plays a very important role in shaping the Indian economy, given its linkages to around 276 ancillary industries.

According to a report by the Ministry of Housing and Urban Poverty Alleviation (MHUPA), India’s urban housing shortage is estimated at nearly 18.78 million households in 2012 where 95 percent of it is in the economically weaker section and low income group.

This massive shortage provides a huge opportunity for the affordable housing to grow at higher level over next decade and more. Also with housing being the top priority of the government, ‘Affordable Housing’ has become the new mantra in the country and leading developers are launching projects catering to this segment in the peripheries of metros, Tier II and Tier III cities.

The recent extension of the housing for all scheme to loans up to Rs 9 and 12 lakh with an interest subsidy of 4 per cent and 3 per cent and for MIG segment with income between Rs 6,00,001 - Rs 12,00,000 and Rs 12,00,001 – Rs 18,00,000 pa respectively. Also the extension of tenure of loans under the Credit Linked Subsidy Scheme (CLSS) from 15 to 20 years are positive steps and will benefit more home.

This massive boost to affordable housing from the government provides a huge opportunity for housing finance companies including HDFC. Although the average loan amount of HDFC pan India is Rs 25.7 lakh, the average loan size is below Rs 15 lakh for tier II and III cities. With a wide network of 420 offices, HDFC caters to over 2,400 towns and cities across India.

Policies and programmes developed by the government from time to time have been supported by budgetary interventions, bringing in a new era of reforms in the affordable housing sector.

Successful execution of affordable housing projects can address the ever growing housing needs of India. Surplus liquidity with banks post demonetisation coupled with lower lending rates will certainly boost the supply of affordable housing. All these initiatives will go a way to fulfil the Government’s drive of “Housing for all - 2022”

Positives for Affordable Housing so Far

• Giving ‘Infrastructure’ status to affordable housing in the current budget was an extremely positive step. It will open up new financial avenues and reduce cost of borrowing for developers.
• Increasing the allocation to Rs 23,000 crore under the Pradhan Mantri Awas Yojana (PMAY) will also will spur growth. Also the refinancing of individual housing loans of Rs 20,000 crore by the National Housing Bank will help low-income borrowers and Housing finance companies.
• The decision to redefine the size of affordable housing from built up area to carpet area of 30 Sq meters in 4 metropolitan city limits and 60 Sq meters at other locations will help homebuyers in owning bigger houses. Extending the project duration from 3 to 5 years to avail the tax break under Section 80-IBA of Income Tax Act is another major move in favor of developers which will lead to a huge increase in affordable housing.
• The implementation of Real Estate Regulatory Authority (RERA) will create a conducive environment ensuring transparency, timely completion of projects, protects consumer’s interest and curb the menace of black money.

Renu Sud Karnad, Managing Director, HDFC Ltd