The Indian real estate industry is the most promising and largest sector of the country’s economy. It consists of 4 major sub-sectors – retail, commercial, hospitality, and housing, with each sector contributing significantly towards India’s GDP. For comparison, the housing sector saw almost 32% year-on-year increase by the end of 2018, with approximately 193,600 units build in the Tier-1 cities across India.
Affordable housing – a brief look
- 4 Crore new houses – Will be built by the end of 2022 target by the Government of India.
- 1 Crore new houses – Is to be built in the rural parts of the country by the end of 2019.
- 65% – Of all sanctioned houses have been successfully built in the urban parts of the country.
The massive growth in this sector was necessary to curb the growing number of homeless people across the country. Recent studies indicate that a vast majority of economically weaker and low-income section of the community is in desperate need of affordable housing with the basic amenities, especially those who live in or near the urban centres. India’s urban poor often fail to secure proper housing for themselves and their family because of the heightened demand and cost of a property.
As a relief measure, the Government of India has initiated several policies to create affordable housing for the economically weaker sections of the community. These projects encompass both rural and urban areas of the country, focusing on creating an affordable, sustainable, and high-quality residential plot for the Indian populace.
What is affordable housing?
Affordable housing schemes offer residential plots built especially for individuals and families who fall under the margin of average household income. Such schemes are considered as the key solution to reduce the number of itinerant individuals in a developing country like India.
Recognising its effectiveness, the Government of India has allocated a further Rs. 10,000 Crore to the National Housing Bank. This monetary boost will be utilised to provide housing loans to individuals who cannot secure feature-rich home loans from usual sources, namely Government-backed financial institutions and NBFCs.
Financial boost for inexpensive housing
The Rs. 10,000 Crore monetary boost will be directly received by the Housing Finance Companies to develop better liquidity prospects for home loans. The government has also approved a one-time partial credit guarantee to public sector lenders, which will allow them to purchase high-rated assets.
It will allow lenders from non-banking financial companies to offer credits under several Government-subsidised schemes, allowing a prospective borrower to meet the necessary home loan eligibility criteria and avail a credit when required.
Moreover, the Reserve Bank of India also increased the Facility to Avail Liquidity or Liquidity Coverage Ratio in an attempt to match the Net Demand and Time Liabilities of private financial institutions. It will provide an additional Rs. 1.34 Lakh Crore of liquidity coverage, creating a financial cushion for companies in case they face issues with overwhelming NPAs.
Benefit for borrowers
Prospective homeowners hailing from economically weaker sections of the community will now be able to easily fulfil home loan eligibility criteria and avail credit from lenders that have affiliations with the National Housing Bank. They can stay ahead of their instalments thanks to the subsidised rate of interest and better knowledge of how much loan EMI one can afford.
Thanks to the generous monetary boost, India is likely to see a significant hike in the availability of high-quality, yet affordable housing over the upcoming years. It will benefit millions of residents, who are in desperate need of housing yet cannot opt for the necessities due to financial shortcomings.