by Mr. R. V. Verma, NHB
Housing has long been
identified as a social priority next only to food & clothing. Though a
capital - intensive industry, the housing sector, ironically, has been the most
capital-deficient.
Supply side
issues..!
As a result, the
unmet housing demand & the gap in
supply have increased manifold over the years.
The housing sector in
India is a study in contrasts.
 |
R. V. Verma, NHB |
On one level, housing
finance is considered a safe & attractive product by the financing
institutions, while on the other, there is negligible credit flow to the
vulnerable & needy segments of the society.
Despite the continued
expansion in the retail housing loan market, there exist wide gaps on the
supply (project) side, relating to construction & supply of housing units
in different price bands affordable to the buyers & borrowers. The supply
side issues need to be addressed.
Housing in India has
come a long way in the last 3 decades or so.
Earlier, house
seekers had few options beyond self construction or / purchasing from the
public housing authorities; now there is a slew of options available to the prospective
house buyers.
Banks & financing
institutions are now vying with each other for a piece of the ever-growing pie.
The demand side of
the market, particularly that emanating from the middle & higher income
segments, has taken off relatively well. The positive developments on the
demand side are not, unfortunately, being mirrored on the supply side.
There is still a very
limited supply of housing projects catering to the lower, lower - middle, or
/ even middle - middle income segments.
Facilitating flow of
formal credit to the real sector promises to be a win - win situation for all
the stakeholders in the form of improved access to credit at reasonable cost,
enhanced transparency, improved understanding of the sector by the lenders
& better oversight.
All of this leads to
improved investor confidence &
better market sentiments, besides opening up a large, relatively
untapped market segment to the lenders.
Policy coordination
between real & financial sectors
will improve systemic stability, transparency, and all - round economic and
social development.
Capital
& mortgage markets..!
With an enabling
credit environment for the housing projects, the psychology of scarcity would
gradually ebb, making the system less susceptible to volatility and asset
bubble phenomenon.
If the bankers’
lending for affordable housing projects could be included within the overall
priority sector target, it would bring about improved supply, moderation in
prices, and better integration between the real estate & the financial
market.
The vibrant capital &
mortgage markets, good information channels in the form of credit bureaus,
RESIDEX, risk mitigation tools like mortgage credit guarantee, together will
result in a more conducive environment for pushing the real sector growth.
The recent Reserve
Bank of India (RBI) initiative of incentivising lenders in the form of reduced
risk weight are welcome steps in this direction.
Building on such
initiatives by including affordable housing projects within the scope of
priority sector will be an added incentive to the lenders.
The author
is Mr. R. V. Verma is CMD, National Housing Bank (NHB).
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