The prices of houses need to be brought down for home loan demand to go up: Sriram Kalyanaraman

Accommodation Times News Services

By Nikita Parekh

Shri Sriram Kalyanaraman1.  Housing Sector is one of the largest employment generator of the economy yet it has mostly been in unorganized sector. How do you see housing sector developing over next decade or so

Housing sector is definitely one of the largest employment generators in the country, with forward and backward linkages to nearly about 250 ancillary industries. Thiswill not only provide employment opportunities to many, but also facilitate overall economic vibrancy for the country. Construction sector, also provides a huge employment window, though it is still manual intensive and unorganized. There is now a large degree of awareness among big builders in particular, to improve the quality of working conditions of the labour deployed with suitable safety nets.Increasing use of pre-fab and modular construction technologies and flexible designing approach, necessitated the sector becoming more organized. This also reduces the time and cost overrun on housing projects, and would have cascading effect on quality of delivery of the projects. Enhancement in the overall credibility of the system in the coming years would bring quality and affordable housing for the coming years.More than 93% of India’s workforce is in the unorganized sector.As our PM has said that if we have to promote the development of our country then our mission has to be `skill development’ and `Skilled India’ The recently announced National Policy on Skill Development and Entrepreneurship, 2015 also envisages the strengthening and certifying the skills of the unorganized workforce. This would facilitate in the development of organized workforce in India, in the years to come.

In view of all this, we feel that the housing sector is going to become more organized in the time to come, which would lead to multi-pronged benefits. First, organized players would be more professionalized in their approach to every aspect of the business, be it raising capital,  project execution and monitoring, compliance with statutory requirements, etc. Secondly, the organized sector would be able to do much better in terms of human resource management than the unorganized sector, leading to better skill management, enhanced social security, and brighter prospects. Thirdly, the people employed in the sector would become much less susceptible to exploitation than they would in the unorganized sector. All this would have a cascading effect on the quality of delivery of the projects, enhancing the overall credibility of the system. Therefore, I feel that the housing sector, in the coming years, would emerge as a much larger employment generator, with enhanced employment prospects, skill management techniques and  social security, than what are available in the system today.

2.   How do you think has the slow growth of Indian economy over last few years impacted the housing sector in general and housing finance business in particular?

Overall housing finance market growth was maintained at about 19 percent during 2014-15. From the first quarter data available with us, we perceive that the pace of growth would continue for FY 2015-16, supported by the Government thrust on housing and the supply and financing side intervention by the policymakers.

Tier-II and Tier-III cities across pan India are leading the growth in housing loan demand. This is, inter-alia, on account of rising incomes and first time home buyers from those cities. Metros and other bigger cities, where the demand for housing loan was not high was due to buyers’ sentiment to wait and watch for correction in housing prices. The growth has slowed down primarily in major cities wherein the pricing has not matched the buyers’ expectations. Overall buyer sentiment is expected to rise, as the economic growth hasstarted to take-off.The prices of houses need also to be brought down for this demand to go up.

3.   National Housing Bank has been one of the pioneers of Housing Finance Business in the country. How do you see its role in changing housing Finance Business in the country?

NHB was set up at a time when the local and regional level housing finance institutions were nearly absent and the banking sector had no pressing priority to do housing finance on any significant level. The purpose of setting up more local and regional level specialized institutions is to have dedicated outlets for supply of housing credit. NHB has focused its attention to develop more housing finance companies (HFCs), which are specialized lending institutions in housing through different market players. As on date, 66 HFCs are registered with NHB and their market share is about 40%, compared to banks. We would like to nurture them well and increase the number either by considering infusion of equity or by providing refinance to HFCs, at early stages.

To improve the affordability of the borrowers, especially in the EWS/LIG segments, NHB is acting as a Central Nodal Agency in various Central/State Government Schemes, such as the CLSS and also administering Credit Risk Guarantee Fund Scheme in orderto leverage institutional financing for the smaller borrowers.

4. How do you see the massive rise of NPAs in banking sector in general and housing sector in particular? What should be done to curb this menace?

NPAs in general is a cause of concern and the Central Bank and government are taking measures to address this.  As per data available with us, NPAs in case of outstanding individual housing loans of Public Sector Banks have shown a declining trend i.e. 2.35% in 2012-13 to 1.38% in 2013-14 and 1.20% in 2014-15. The trend in NPAs in case of outstanding individual housing loans of Housing Finance Companies was around 0.50%, in the last three years. However, there is a trend of higher delinquencies in low ticket houses in certain pockets which needs to be addressed.

5. Housing is still not classified as an industry? How is this impacting the investment in this sector?

Housing projects meant for low income households, if considered under the category of “Infrastructure” i.e. for eligible for the benefits as available to other projects under the infrastructure status, would provide fillip to the investment in the sector. Rationale for suggesting the above is to

  1. augment the supply of affordable housing stock for low and moderate income households in urban areas of the country;
  2. augment the flow of credit for EWS/LIG Housing;
  3. meet the financial needs of various entities involved in provision of housing stock in the country;
  4. support up-gradation of sub-standard dwelling units and incremental housing.

6. Affordable Housing for lower middle class and poor people still remains a pipe dream. How can housing be made more affordable for these sections of the society?

There are various challenges due to several economic, regulatory and urban issues being faced in the path towards achieving the goal of Affordable Housing. With rapid urbanisation, there is a huge pressure on limited land availability, drives up the cost further. Several initiative taken by the Central/State Government have partly addressed the issue. Recently, with the objective of achieving ‘Housing for All by 2022’, the Hon’ble Prime Minister has launched the Pradhan Mantri Awas Yojana. The “Housing for All” Mission seeks to provide central assistance to implementing agencies through States and UTs for providing houses to all eligible families/beneficiaries by 2022, and address the housing requirement of urban poor including slum dwellers through the following four programme verticals:

  •  i.      Slum rehabilitation of Slum Dwellers with participation of private developers using land as a resource.

ii.      Promotion of Affordable Housing for weaker section through credit linked subsidy

  •  iii.      Affordable Housing in Partnership with Public & Private sectors
  •  iv.      Subsidy for beneficiary-led individual house construction

As per the Scheme Guidelines, National Housing Bank (NHB)has been identified as Central Nodal Agency (CNA) to channelize the affordable housing for weaker section to the lending institutions through Credit Linked Subsidy, which is the second programme vertical as mentioned above.

To address the issue of availability of finance for the Affordable Housing, as per the endeavour of the Government of India – ‘Housing for all’ by 2022, NHB has launched the dedicated Refinance schemes with the intention to reach large number of beneficiaries.

7. There is a clear divide in housing development in urban India of Tier I and II cities, and semi urban and rural areas, despite the fact that majority of population lives in rural and semi urban areas. How can this divide be eliminated.

NHB has launched the dedicated refinance schemes under Rural Housing Fund and Urban Housing Fund with the intention to reach large number of beneficiaries live in rural, semi urban, and urban areas through concessional funding.More uniform housing development in urban India would happen, once the recently launched Credit Linked Subsidy Scheme (CLSS) under Pradhan Mantri Awas Yojanapicks up in all 4041 statutory towns as per Census 2011.

NHB is also in the initial stages of working out a Eco system for Micro housing whereby we address both the supply side and demand side.

8. What is your assessment of the Smart City plan of the Government? How can housing be made smarter?

A smart city would ensure core infrastructure needed for decent living in urban areas. The purpose is to drive economic growth and improve the quality of life of people. Recently, the Government of India announced a list of 98 cities and towns selected for development as smart cities. 98 cities selected under Smart City Mission have a population of about 13 crore accounting for over 35% of the country’s urban population.

Smart city is expected to encapsulate either a retro fitting or redevelopment or greenfield development model, or a mix thereof and a Pan-city feature with Smart Solution(s). This would enable housing smarter with the intended benefits of network, solar energy etc. for the households living in it through improved eco-system and climatic conditions. Once we develop a successful model of low cost housing eco system it could be replicated in all places.

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