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Foreclosed flats to
flood market
By Sanjay Chaturvedi
Foreclosed flats repossessed by Housing
Finance Companies (HFCs) are in the market. HFCs have taken possession
after the borrowers were unable to pay and handed over possession
either through court or by mutual understandings.
The default rate recorded by various HFCs
per annum is approximately 2%. With to-days Rs.35,000 crore housing
finance market the amount of default could reach beyond Rs.1000 crore.
And it is mounting. Since maximum housing finance has been given in
the year 2001 to 2003. The estimates indicates that more than 5 %
defaults will be recorded at the end of year 2008.
But for now, buyer can search NPAs and
repossessed flats from HFCs. Huge stock of real estate is available
for lowest rates in the market. Just like car market, real estate
market is all set for second sale of brand new flats through HFCs.
For the years 1996 till 1998, the housing
finance institutes had disbursed Rs.51,885 crores all over India. The
growth percentage was recorded at 28.5 % at that time. Total housing
finance market is approximately Rs. 35,000 crore per annum.
Industry
A significant feature of the housing
requirement estimation is that, of the total requirement of 16.76
million units to be built/upgraded during the 9th Plan period, about
70 per cent of the units cater to the urban poor/weaker sections of
the society while about 20 per cent is for low income groups. About 10
percent of the urban requirement is to address the needs of the middle
and higher income group segments. This would mean that for urban
housing alone, the total requirement of investment would be Rs.
1,21,371 Crores during the next five years to eradicate the housing
shortage of 7.57 million, up-gradation of 0.32 million semi-pucca EWS
units and the additional construction of 8.67 million units. In
combination with the fund requirement for rural housing too, the total
requirement has been estimated to be order of Rs. 1,50,000 Crores.
The actual likely availability could be
gauged from that against the estimated flow of funds of Rs.250 billion
(US$ 5.7 billion) in housing sector from formal source during the 8th
Plan period, the actual availability was only about Rs.60 billion
(US$1.36 billion). Assuming the full availability of the estimated Rs.
520 billion (US$11.81 billion) during the 9th
Plan period, the flow of funds falls short by nearly 3 times
the requirement.
India is a part of the global trend towards the increasing
urbanization in which more than half of world’s population live in
cities and towns. 27.8% of India’s population live in urban areas,
which is expected to increase to 41% by 2021. Similarly the number of
million plus cities has also increased from 23 in (1991) to 35 in
2001. The total number of urban local bodies as of now stand at 3682,
out of 96 are municipal corporation, 1494 are municipalities and 2092
are Nagar Panchayats.
The demand for housing finance has increased with income tax
exemption. Although aggressive marketing schemes creates more wider
market, but affordability and non secure employment will certainly add
more figures to the default rates. It may be noted that individual
finance were made available in many illegal constructions where BMC
had recently issued notice of illegal constructions.
Under the circumstances, we should be ready for highest default
rate in coming year as against industry standards.
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