What Is Hampering Progress Of Housing For All Mission?

In a vast country such as India, providing housing to all is not an easy job. However, the government has promised to do that by 2022, for which it is being admired as well as criticised.

However, numbers suggest that people want to buy and the government wants to provide, but over 50 per cent prospective homebuyers say that they cannot afford a home. Others cannot afford a home loan either.

What could be the solution, then?

P K Aggarwal, chairman, Signature Global Group, says that the consultation is must. So, a council for affordable housing – quite similar to the GST Council --- needs to be formed with representatives from across states. All the stakeholders keep a track of the progress made by them and report the same. As of now, the progress of the mission is dismal compared to the target that had been projected for 2022.

Let us look at some issues that restrict the progress of the mission.

Where the focus is and where it should be

While the focus of the affordable housing is the low-income group (LIG), it is the economically weaker sections (EWS) which need more attention. As profit margins for developers are thin, this segment doesn't look lucrative or even promising to many. In reality, banks do not cover this population either. As a result, those living in slums have been largely ignored.

Sanjay Chaturvedi, chief executive officer, Shubham Housing Development Finance Company, says: “Home loan growth was meaningful between during 1970s-80s. Even then, most homebuyers made a home purchase with their retirement income and provident fund. Today, while the government is trying to provide relief to the urban poor through the Housing for All mission, it may be tough. Even non-banking financial institutions (NBFC) wouldn't lend to slum dwellers as it is a risk. The reason being, they do not have a formal income.”

Where is the money?

The number of people who can actually use banking finance to buy a house is dismal.

“Only three per cent of the Indian population pays taxes. Of this, with almost two per cent are not eligible to avail of housing loans. This leaves one per cent who can get a loan to buy homes. What about the rest of India?” asks, Arun Mohan, a senior lawyer.

Homebuyers are not alone in their plight. Developers, too, are not finding it easy to get hold of bank loans, and understandably so. Most developers complain of funding being prohibitive and expensive which deters them.

Rahul Rai, Head, Real Estate Investment Business, ICICI PRU, says: “Developers will need to stress more on efficiency in construction and delivery. Even when government is introducing reforms and laws, there shouldn't be any changes made retrospectively as these spikes the prices of whom both developers and then buyers fall victim. Overall, technology and policy remains critical. An ecosystem of credible developers will also help.”

“Banks have restrictions, so funds will remain costly. One must make sure the money borrowed should be returned timely thwarting any chance of further cost increase. Look at the value-add, and not at the sticker rate only,” he adds.

Manish Baid, DGM, HDFC, says: “While developers may ask for loan against their unsold stock, this is not viable for financial institutions as they depend on the interest every month and not on the proceeds after liquidation of assets of such developers.”  

Are those who can afford actually better placed?

It would be wrong to assume that those who can afford a home are any better protected. As the fateful story of Jaypee Insolvency case developed, a legal fact, that was there always, came to light that homebuyers are “unsecured creditors”, and may not have much legal protection in case something goes wrong.

Kapil Dev Taneja, Director, IRR Insolvency Professionals, says, “The law will have to be amended. The Supreme Court has stepped up to protect homebuyers' interest though.”

Hitender Mehta, partner, Vaish Associates, says: “Buyers lien, a concept prevalent in countries such as Canada, should be adopted in India as well and should be incorporated within the real estate law or the insolvency law. It will assure the homebuyer that even if a developer is pronounced insolvent and his assets are liquidated, the home that the buyer has purchased will remain his solely.”