Wasting domestic demand
Accurate as this surmise is, it runs into problems if policy does not work to tailor the advantage. An example of this is low cost housing. The possible demand for low cost houses in the economy is above Rs 6,20,000 crore, estimates the recently released report Trends in Housing in India by the National Housing Bank. The same report, however, also points out this demand cannot be met if the corresponding market for securitisation of housing loans does not take off.
The world economy has paid a huge price through the sub-prime crisis, but still there are only two options for India to provide adequate housing for its people. The head in the cloud response is to imagine a government at the state or the Centre with unlimited ability to create fiscal deficit to go on a housing construction spree for this decade and next.
The other is to create a market for securitised debt from the loans taken out by the low income families. Why only low income housing? The ticket size of each loan taken out is too small for real estate companies to take an interest while the risk of delinquency is high (see the same data for NPA across income brackets) for banks to make the effort to offer more loans unless they can
Be the first to comment.