How World’s Leading Economies Are Fulfilling Their Housing Needs

Governments across the world keep renewing their focus on providing housing to their ever-growing citizens. This primary responsibility of a government poses many a challenge, and every government handles it differently. At a time when India is working hard to meet the Housing-forAll-by-2022 target, it would be of great help to look at how some of our Asian neighbours have been supporting housing, and what we can learn from them.

Japan

Putting a massive thrust on improving the rate of home ownership in their country, the Japanese government had initiated three flagship housing programmes after World War-II─ concessional lending through the Government Housing Loan Corporation (GHLC), provision of multi-family housing estates for middle-income groups through the Japan Housing Corporation, and public housing for low-income groups with provisions for subsidised rents. Japan is also known for its Public Housing Act which focuses on development of rental housing properties for people from the low-income groups.

With the help of several breakthrough policies, Japan managed to achieve a homeownership rate of 60 per cent by 1960s (the current rate is 62 per cent). At the same time, Japan also focused on providing subsidised rental housing to low-income groups. This was one of the reasons why Japan recovered so well against all the odds and became one of the largest economies in the world after the US. However, after going through a prolonged period of recession, Japan gradually minimised its exposure to subsidised housing, but, it still offers a number of incentives and exemptions to homebuyers.

The mortgage interest rates in Japan are as low as 3.4-4 per cent for a period of 15-30 years. One can claim home loan tax deduction of on one per cent on the remaining home loan for a period of 10 years. If the amount of this tax deduction exceeds tax liability, the amount of deduction can be subtracted from the property tax levied by municipal corporations.  

South Korea

Just like Japan, South Korea also launched several comprehensive policies aiming at both home ownership and renting to advance its economy. The Two-Million Housing Drive (TMHD) is one of the historic programmes that the country launched during 1988. Under this programme, South Korea aimed at building 2.5 lakh public rental housing units from 1988-1992.  

In 2009, the key public sector institutions viz. the Korea National Housing Corporation and the Korea Land Development Corporation were merged to form the current Land and Housing Corporation that accounts for 81 per cent of the total volume of residential land development and 145 of the country’s housing stock. South Korea not only focused on building its housing sector through active participation from the public sector but it also laid down clear housing standards for low income groups.

In terms of financing, the home loan interest rates in South Korea hover in the range of 3-5 per cent an annum for a 20-year term.

Singapore

More than 80 per cent of the housing stock in Singapore is developed by the state-run Housing and Development Board (HDB), and around 95 per cent of this stock is sold on subsidised rates on 99-year leasehold basis. The remaining is composed of rental units.

Furthermore, the Singapore government provides grants and concessions to buyers for enabling them to purchase homes for self-use from the HDB in both primary and secondary markets. It is relatively a small country in terms of size. However, its proven policies and practices that advanced its economy quite strongly are worth noticing.

The home loan interest rates in Singapore are at meager 1.6 per cent a year for the first two years of the term. Thereafter, it is increased to 2.35 per cent an annum.

In India, on the other end, home loan interest rates are at 8.3-8.4 per cent (these are among the all-time low rates). Looking at the other Asian economies, India has done quite little in terms of supporting its people in terms of housing.

The concept of subsidised rental housing is non-existent in the country while nearly all the major economies in the world have been doing a lot on this front from the past several decades.

In the past few years, we have witnessed an unprecedented level of reforms in housing and real estate, perhaps the coming times will bring in reforms that take us closer to our counterparts.