Your dream house now closer to reality

Ravindra Sudhalkar

Every consumer dreams of a house of his own. This eternal dream of most consumers — key to the growth of the housing sector —has got the much-needed fillip with the government introducing its Housing for All (HFA) policy and supporting it with crucial steps like RERA (Real Estate Regulation and Development Act, 2016) and grant of infrastructure status to affordable housing projects.

This will provide the critical boost to the economy of India, which at present is witnessing fast-paced urbanisation. 

With large masses from sub-urban and rural areas flocking to metros and big towns in the search of jobs and livelihood, there is a widening gap between demand and supply in the housing sector.

But the common man’s dream of owning a house remains a forlorn idea as the prices of houses have been out of the reach of his/her pocket. 

Now, the HFA scheme aims to bridge both the gap in funding — with the Pradhan Mantri Awas Yojna (PMAY) and Credit Linked Subsidy Scheme granting 3-5 per cent interest savings — and supply by according infrastructure status to affordable housing.

Experts say this will benefit 90 per cent of the Indian population. Homebuyers in the middle income and lower income categories will particularly benefit from the policy thrust to make houses affordable. 

The policies now in place offer equity support to individuals via interest subsidy under PMAY and other favourable regulatory support for housing finance companies.

This includes allowing debt mutual funds to invest up to 40 per cent of their assets in housing finance companies (HFCs). AAA-rated HFCs are excluded from sector-wise cap for investments in the financial and insurance sectors. 

The overall macro indicators have also synced well with this government impetus with interest rates having trended down by 185 basis points in the past two years.

The National Housing Bank (NHB), the regulator for HFCs, has been providing a steady source of refinancing to housing finance companies (HFCs) and state cooperative banks to extend credit to weaker and underserved segments. 

These schemes allow HFCs to gather lower cost of funding from the regulator and then lend it at a fixed spread, which has been increased to 3.5 per cent from the earlier 2 per cent, thus helping HFCs and banks to cater to this segment profitably.

Additionally, focus on information sharing and digitisation driven by Aadhaar-based eKYC verification has resulted in lesser costs and quicker turnaround time for home loan processing, thereby solving a genuine consumer need gap.

Eligible applicants go up

While all schemes are working towards the objective of housing for all, the Credit Linked Subsidy Scheme (CLSS) — from the point of view of a financier — has been evolving to increase eligibility from a household income of Rs 6 lakh to Rs 18 lakh (for one year for now) in the latest budget, implying a sizeable urban and MIG (middle income group) population being eligible for the scheme. 

The scheme has now been expanded to include applicants up to the income of Rs 18 lakh. This addition will increase the number of qualified applicants.

Boost to support infrastructure

In parallel, the government is also working on boosting the support infrastructure which will provide the impetus for the development of micro-markets and peripheral locations around the bigger urban centres. 

These various infra projects in major cities will boost the growth in the housing sector, thereby increasing the opportunity for housing finance companies.

Strategic projects across major cities are sure to facilitate the development of housing projects and subsidiary industries in nearby areas thus aiding commerce and in building the GDP.

The Pradhan Mantri Gram Sadak Yojana (PMGSY) and Digital India aim to connect rural India with major economic centres improving the reach of economic inclusion.

Change in income tax norms on second home ownership in the Union Budget provides more impetus to home ownership and will bring in more stability in property prices.

Towards transparency

With the Real Estate Regulation and Development Act (RERA) coming into effect, the government wants to promote more transparency in real estate dealing and to bring in a higher level of accountability into the sector. 

This is sure to improve consumer confidence and should bring in the fence sitters into the sector. RERA is expected to bring in transparency in fund inflow and outflows of a project thereby avoiding siphoning of funds to other projects or buying lands. 

There will also be greater transparency on project plans, thus avoiding mis-selling. Customers will know clearly what they are paying for as against today’s practice of saleable area. 

It is possible though that the cost of compliance may increase property prices whereas increased transparency may make things competitive. One can also expect easy monitoring for HFCs, CF and Partly Disbursed Home Loans.

The right ecosystem

With a string of initiatives, policy changes, stimulus and regulatory framework, the government is creating the right ecosystem to win over buyers’ confidence and bring in the right set of players who will service the category’s needs. This will surely steer the sector in the right direction in the years to come.

(The writer is CEO, Reliance Home Finance. The views expressed in this article are his own)