- By Deo Shankar Tripathi
Budget 2020 India: Liquidity crunch in NBFC/HFCs post-September 18 hit the housing and real estate sector hard, which was already reeling under huge unsold inventory and delayed project completion, causing enormous heartburn to home buyers who booked their homes in these projects. The problems in real estate sector and NBFC/HFC liquidity issues have been one of the major contributors in economic slowdown and job losses. The foremost priority should be a quick revival of the real estate sector and normalcy in NBFC/HFCs. The various reforms contemplated by RBI/government may go on simultaneously.
Few suggestions that can help:
1. In the last fiscal budget, tax exemption on home loan interest was increased from 2 lakh to 3.50 lakh for loans up to Rs 45 lakh availed by March 2020. This may be extended for next 5 years without a ceiling of Rs 45 lakh.
2. Rs 30000/ crore fund placed with NHB for refinance and liquidity infusion in HFC can be increased. The eligibility criteria can also be modified to support liquidity of smaller HFCs who are still struggling for liquidity. High rated large HFCs are able to get huge refinance through this fund which otherwise are able to raise money from multiple sources at cheaper cost.
The tenure of refinance from 7/10 years is considered for increase to 15/20 years to address Asset liability mismatches issues.
3. Access to long term funds from PF/Insurance/Debt capital market is required for raising long term resources to provide home loans for 25/30 years. To provide credit enhancement to low rated HFCs, NHB be authorised to provide guarantee to investors to the extent of 10/15% of issuances with necessary cap on issuances based on net financials of HFCs.
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4. Credit Guarantee Fund Trust for Low Income Housing (CGFTLIH) was launched in 2012 on lines of the popular Credit Guarantee Fund Trust available to small and micro units, but this has been almost a non-starter mainly due to rigid criteria. This facility is not available to lenders for loans under PMAY popular CLSS scheme. Objective of CLSS subsidy and guarantee both have different purpose. While CLSS subsidy is to improve affordability of EWS/LIG, the credit guarantee is to provide confidence and safe guard against various deficiencies in documentation of informal segment loan seeker. The scheme can be extended for all home loans up to 10/15 lakh to EWS/LIG segment. The operation of the scheme is simplified to encourage lenders to avail it.
5. Annual income ceiling for LIG (Low income group) is 6 lakh. Income tax exemption may kindly be extended up to Rs 6 Lakh to all.
6. Due to on-going economic slowdown, as well as volatility in income, existing housing loans of EWS/LIG are showing delinquencies. RBI is requested to permit one-time restructuring of home loans up to Rs 25 lakh outstanding as on 1st April 2019.
7. Subsidy under CLSS is available post disbursement of home loan. For taking home loans, person of EWS/LIG have to arrange own contribution of 10/20%, stamp duty and other preliminary expenses charged by lenders for valuation of property and legal search etc. On an average minimum 20/25% is required to be arranged by poor person to have his own house. Either he has to borrow from relatives/ market at abnormal rate or not buy home at all. Hence this keeps away many aspirants from EWS/LIG category to fulfil their dream of owning home, which to that extent defeats the purpose of Housing for All.
This problem of arrangement of own contribution can be remedied if subsidy admissible under CLSS be allowed to be treated as own contribution of identified eligible beneficiaries under CLSS. Nominal amount for miscellaneous expenses will not be difficult to be arranged by beneficiary. In past various poverty alleviation/employment generation scheme were functioning on same model. This will ultimately serve the holy purpose of Housing for All without any additional burden on ex chequer.
8. Waiver or only 1% stamp duty across the country for home loans up to 10/15 lakh for EWS/LIG segment.
(The author is MD and CEO of Aadhar Housing Finance. The views expressed are the author’s own)