Considering the slowdown in growth of housing loans due to difficulties for Economically Weaker Section (EWS) and Low Income Group (LIG) category people in repaying scheduled EMI after availing housing loans, there was specific demand from real estate players that Government should increase the subsidy amount on affordable housing and also instruct RBI to further reduce the applied interest rate upon affordable housing loans. But there was no such announcement in the annual budget 2018-19.
Against the demand to increase the subsidy linked to loans for affordable housing, Government has made provision of Rs. 1,900 Crores for 1 lakh customers (with average subsidy of Rs. 1.9 lakh per customer) in the union budget 2018-19 for Ministry of Housing and Urban Poverty Alleviation (MoHUPA) under Credit Link Subsidy Scheme (CLSS). Government has tactfully declined any further inducement for poor people to avail housing loans because the proposed subsidy amount in union budget 2018-19 is lower than what EWS customers are presently availing. It is disappointing the builders because their tensions to sell out inventories of unsold housing units remain unaddressed.
The biggest amount allotted in union budget 2018-19 for MoHUPA was making provision of Rs. 4,514.92 Crores as Central assistance development of 51 lakhs houses under PMAY –U scheme. Hope the Government is not joking about affordable housing because with just Rs. 8,852.78 as average amount per house, one can perhaps better do paper works only; and may not even prepare a toilet in any pucca (cemented) housing units. Government should make it clear that who will finance to purchase required land and construction of these 51 lakh houses in urban India where land prices is already a big challenge.
Builders holding inventories of unsold housing units are disappointed with the union budget 2018-19 as they failed to realize anything against their hope that Government would like to help them through suitable scheme to boost selling of ready but unsold flats. Considerably builders cannot refund investment amount to their financiers unless their ready stocks are sold out. And unless they fulfil their old commitments, hardly new investor would like to lend them for new projects. With lesser investors and buyers in real estate, the builders are obviously unable to launch new housing projects. On other way it seems that Government has anzlyzed that builders have already exceeded supply of housing units compared to potential demand from mid and high end customers. So the Government might have decided to not help the builders through further subsidizing the home loans for affordable housing, as that may go on adding the risk of NPAs in housing finance segment where NPAs for lower amount loans are already on rise.
Now in attempt to recover their old investments from builders, if Indian banks and HFCs try extending over finance to customers allowing them buy high valued housing units, they might really be putting the loans under higher risks for NPAs. But unless builders feel ease, launching of affordable housing projects may also start declining. In these conditions the rate of employment may further decline. With poor growth rate in employment, India may not attain better economic growth. So there it is required that builders should be helped. But if Government and bankers are finding difficulty to help the builders, they should reduce the prices of housing units to convert them into affordable housing units. It may be better to partially loose the capital instead of decaying capital in wait for customers.
Banks and HFCs can also help the builders if they use alternative housing finance models to enable promoting affordable housing. Available housing loans in India are still not affordable because the monthly instalment amounts over 30% of monthly income of customers. Even the EMIs under subsidized loans are more than 32% for EWS category customers. If housing finance has to be affordable for masses instead of selected class, the structuring of repayment schedule should be based on considering the impact of inflation upon change in income level of customers in years to follow. If banks and HFCs use Joint Asset Lease as alternative housing finance model for affordable housing, it may attract a lot more people because the scheduled monthly repayable amount stands around 27% of customer’s monthly income compared to 37% in simple housing loans and 32% in PMAY housing loans.
Hope the considering the utility of Joint Asset Lease (JAL) in affordable housing finance to boost employment growth in real estate market; and ultimately in economic growth Government would like make regulatory provisions to introduce JAL in India.
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