Union Budget 2019 India: The growth of the housing sector seems to have halted and the industry experts feel that the concerns around NBFCs and housing finance companies need to be addressed as a priority to not only give a boost to the sector but also because lack of funding may impact the success of the ‘Housing for All’ mission of the government. We spoke to one of the players in the industry to know the concerns impacting the sector and the status update of the Pradhan Mantri Awas Yojana (PMAY).
Here is Deo Shankar Tripathi, MD & CEO of Aadhar Housing Finance sharing his views about the state of the industry.
How bad is the situation in the NBFCs and Housing finance companies in terms of lending? Is there an impact on the ‘Housing for All by 2022”?
After the IL&FS Crisis in September 2018, suddenly the liquidity flow to NBFCs and HFCs have almost been choked. Barring few NBFCs and HFCs, the others are not able to get normal term loans from the banking system or from capital markets. This has resulted in sharp decline in overall home loan growth and more particularly low income affordable housing finance because most of the housing finance companies could not continue the home loan disbursements in the same pace as they were doing before.
Housing for all mission 2022, which was going with full stream, suddenly got a jolt. EWS/LIG and informal segments are hit hard as these low income segments were largely catered by the affordable housing finance companies.
The NBFCs and some bigger HFCs also could not lend to the real estate sector which anyway was not getting support from the banking system. These twin issues of slowness in home loan disbursements and stoppage of fresh loan for constructions added to the woes of the struggling real estate sector. This situation put the developers in a tight spot and most of the developers have not only defaulted in their loan repayments but also are not able to complete their projects in time.
How do you see the capital gains on property playing a role in the investors mind? What changes do you expect on capital gains to be taken by the FM in the upcoming Budget?
The capital gains in last 3-4 years have almost been negligible due to stagnant property rates. To instil some activity in the properties and real estate sector, investors should be able to see some value in investing in properties and any Investor feels that the capital gain tax should be applicable to the minimum possible extent. In the upcoming Budget 2019, I feel that the government should consider some indexation benefit as was given in the last interim budget; it can be increased to the level where if any property sale is happening within 5 years, the applicable capital gain tax should be only 10 per cent, after 5 years, the existing system may continue. This will be very attractive for the investors to invest in properties.
Has the Pradhan Mantri Awas Yojana been a success so far considering a huge population still without homes? What steps may be taken in the Budget 2019-20 to provide a boost both in Urban and in PMAY Rural?
PMAY scheme is really a game changer. After the initial launch in 2015 for urban and 2016 for rural PMAY, it took about 2 years’ time to take off. From 2017 onwards the scheme was doing very well but after September 2018, because of the HFC/NBFC liquidity crisis and slow-down in home loan disbursements, it has slowed down. But the demand for affordable housing continues to be robust; therefore, PMAY scheme is very important to give fillip to the affordable housing segment and to provide a home to the income category i.e. EWS and LIG segments.
I think the scheme, in its present shape, is doing well. The only thing Government of India should consider in Budget 2019 is increasing the affordable housing fund from present Rs. 30,000 crore to at least Rs. 60,000 crore with NHB, to give refinance to affordable housing finance companies for loans up to Rs. 15 lakh. There is a humongous requirement from EWS and lower level categories of LIG for loan up to Rs 15 lakh. There is no point in giving refinance to HFCs for lending beyond Rs 15 lakh. So, I think, considering the liquidity shortage, the above points, will be a big step to give boost to PMAY scheme under the affordable housing.