In the backdrop of Housing for All by 2022, there are several moves that the Finance Minister, Arun Jaitley can consider for the housing sector.
In the backdrop of Housing for All by 2022, there are several moves that the Finance Minister, Arun Jaitley can consider for the housing sector. Here are some of them.
Extend infrastructure status to housing and real estate: This will enable them access to funding from banks and other financial institutions at a much lower cost. DHFL also recommends formation of a nodal agency to coordinate efforts of various stakeholders and ensure faster decision-making.
Make strategic investments: Housing for all by 2022 requires development of about 11 crore housing units and this will need investment of more than $2 trillion. This translates to about $250-260 billion annually, more than double the annual investments witnessed in FY14. The government should explore PPPs as an alternative additional source of funding to infuse higher funding in urban housing. It will also facilitate introduction of private sector technology and innovation in providing better public services through improved operational efficiency.
Simplify structural and procedural framework: The growth of India’s affordable housing segment has been hampered by delay in approvals which escalates project development costs. Single window clearance mechanism for affordable housing projects with faster turnaround time should also be implemented besides making available advanced technology which will lead to low cost with faster completion of the affordable projects.
Introduce legal and regulatory reforms – Optimal Floor Space Index (FSI)/ Floor Area Ratio (FAR) density norms will help in reducing costs per unit and increase the economic viability of affordable housing. Rental housing should also be promoted to meet the grand vision of Housing for All by 2022.
Empower the consumer for greater affordability: Priority Sector Lending (PSL) should be redefined. Now only housing loans below Rs 25 Lakhs in metros qualify for PSL. This limit should be increased to Rs 35 lakh and the annual increase be automatically pegged to the WPI will empower customers and incentivise HFCs to lend to affordable housing projects.
Increase refinance to HFC’s: Given that HFC’s operate at a higher cost structure, these companies should be permitted to offer loans at a higher spread, for better operational viability. Steps should also be taken to bring about a level-playing field between private HFCs and universal banks. NHB could work with RBI to regulate, develop and meet the capital requirements of HFCs so that the purpose of disbursing finance at an affordable rate for housing can be achieved instead of just growing outstanding loans. HFC’s currently do not carry any tax benefits on the Fixed Deposit unlike Bank FD’s which enjoy tax benefit under Section 80C of the Income Tax Act for FD’s of 5 year tenure. We recommend extending such benefit to HFC’s to bring them at par with banks.
(The author is CEO at DHFL)
Views expressed here are personal