Budget proposals: Leg up for affordable housing

Jul 19 2014, 09:09 IST
Comments 0
Govt has earmarked Rs 4K cr up from Rs 2K cr last year to NHB for giving credit to housing finance cos for lending requirements of urban poor. Govt has earmarked Rs 4K cr up from Rs 2K cr last year to NHB for giving credit to housing finance cos for lending requirements of urban poor.
SummaryGovt, RBI liberalise financing for housing sector, but hurdles remain on path from banks to buyer.

Over the course of one week, two major announcements have been made by the government and the Reserve Bank of India that could catalyse the housing sector.

In his Budget speech, finance minister Arun Jaitley announced major initiatives for the affordable housing segment and has earmarked Rs 4,000 crore up from Rs 2,000 crore last year to the National Housing Bank (NHB) for giving credit to housing finance companies for lending requirements of the urban poor.

This was followed by an announcement from the RBI on Tuesday that allowed banks to raise long-term soft funds from the market to finance soft lending for home buyers for up to Rs 50 lakh for property values of up to Rs 65 lakh in the six metropolitan centres: Delhi, Mumbai, Kolkata, Chennai, Bangalore and Hyderabad. In other cities, the upper limit will be Rs 40 lakh for houses of values up to Rs 50 lakh.

The RBI has not stopped there. It has said that it would review periodically the definition of affordable housing taking into account inflation.

Housing finance companies say their cost of borrowing would come down and also make it easier for the middle income segment to own a house. “The move will result in bringing down the cost of borrowing and allow the lower income category to own a house. Also the new limit of Rs 50 lakh for six metros is more realistic,” said Keki Mistry, vice chairman, HDFC.

The real estate industry has welcomed the move. “This is indeed a very welcome measure as it will enable the home buyer to access cheaper home loans which in turn is a step in the right direction to provide housing for all by 2022. It would be even better if taking a lead from the RBI, affordable housing per se is be given infrastructure status,” says Getamber Anand, President-Elect, Credai.

“Clubbing affordable housing with infrastructure and allowing priority sector lending will allow the sector to finally access cheaper funding. Home buyers will also benefit since the mortgage rates are expected to reduce for affordable units as costs reduce for banks,” says Sanjay Dutt, Executive Managing Director- South Asia, Cushman and Wakefield.

An estimate says that it takes more than five year’s annual income to pay for a house in the non-metro cities. As a result the available housing stock is priced mostly out of reach for even middle income housing groups. The shortage of

Single Page Format
Ads by Google
Reader´s Comments
| Post a Comment
Please Wait while comments are loading...