Budget 2018: Budget FY18 has maintained its focus on the agenda of ‘Housing for All’ by 2022. Though the allocation is marginally lower than in the last fiscal, it remains sizeable and is likely to support the growth momentum in the affordable housing sector. The thrust on increasing rural incomes is also likely to push demand for housing and is likely to be a positive for housing finance companies from a growth perspective, especially players with a good presence in the rural/semi urban areas. The finance minister announced the government would establish a dedicated affordable housing fund in the National Housing Bank through various funding measures.
Setting up of the Affordable Housing Fund is likely to increase funding options for housing finance companies (HFCs) operating in the affordable housing space. HFCs operating in the affordable housing space (total portfolio of Rs 926 bn as of September 30, 2017, which was 10% of HFC credit) could benefit with lower funding costs and this in turn is likely to improve affordability for end borrowers.
The reduced rating threshold would help broaden the investor base and is likely to increase options for HFCs rated in “A” category of raising longer tenure funds and hence manage their liquidity profile better. The setting up of a dedicated affordable housing fund would reinforce the the government’s commitment to the sector. It is also likely to give a boost to the realty sector and financial institutions supporting the government’s Pradhan Mantri Awas Yojna scheme.