Affordable housing schemes hit hard by animosity between HFCs & realtors

By Indrajit Sen

One of the major impediments to private participation in the affordable housing sector is the growing level of distrust between housing finance companies (HFCs) and construction firms.
This observation was made by HFC regulator National Housing Bank (NHB). There is a deficit of confidence that exists between builders and lenders. Builders continue to be of the opinion that EWS and LIG segments find it difficult to secure loans, which is not the case. While it has been difficult, there are many lenders who are now extending loans to these segments. However, construction firms are still hesitating from entering the affordable housing sector despite loans being secured.
With an increasing number of people migrating to cities and urban areas for better job prospects, it is a known fact that there exists an acute shortage in the affordable housing segment. While construction firms and developers continue to clamor for better incentives to enter the market, housing finance companies feel extending credit to economically weaker sections and lower income groups fails to serve its purpose.
The NHB chief said that entering this segment will be beneficial for all stake holders. Serving the affordable housing market will induce more stability in the sector. This is because it is a large & promising market and all buyers are end-users, consumers. This will be a win-win situation for the builders, the lenders and the regulator.
About subsidies to lenders, the NHB has issued a 5 per cent grant on the principal amount of loans extended to the EWS and LIG categories had failed to take off. The subsidy granted is going to waste as private banks are of the opinion that the target groups (EWS and LIG) do not have a high risk capacity. However, the NHB is devising adequate plans to address the issue.
While an earlier report by the housing and urban property alleviation ministry’s technical group had projected a requirement of 260 lakh homes by 2012 to meet existing housing needs, a joint study by RICS, Level and CBRE released recently pointed out that a minimum 300 lakh additional homes will be required by 2020 if the current increase in backlog of housing is maintained. Of these, 99 per cent of the homes will be required for the EWS and LIG segments. Developers, however, are quick to highlight that there is a lot the government needs to do to ensure private participation.