Its impact on LIG and MIG segments less significant, says RBI report
Even as loan disbursements, as well as launches of new projects in the affordable housing segment, have risen sharply in 2016-17, there has been an increase in the number of non-performing housing loans (NPAs), particularly for the lower Rs 2 lakh category of home loans.
However, the credit-linked subsidy scheme (CLSS) under the Pradhan Mantri Awas Yojana has been found to be effective in improving the housing affordability of the economically weaker sections (EWS) and its impact on making houses affordable for the LIG and MIG segments is less significant, says an RBI report on Affordable Housing.
The RBI report says that the CLSS, however, is found to be effective in making houses affordable majorly for the EWS segment. With CLSS, housing in 21 cities became affordable for the EWS in comparison to only 5 cities without CLSS.
The impact of CLSS in making houses affordable for the LIG and MIG segments, however, is less significant. Given the effectiveness of CLSS in improving housing affordability for the EWS, it should receive priority attention in policy design, the report says.
The report also notes that while the joint efforts of the government and the RBI to boost affordable housing have generated a positive outcome, there are various factors affecting the pace of affordable housing development in India and restricting private sector participation.
These include lack of suitable low cost land within the city limits; lengthy statutory clearance and approval process; shortcomings in development norms, planning and project design; lack of participation of large organised real estate players due to low profit margins; high cost of funds for construction finance making the projects unviable; lack of suitable mechanism for maintenance; challenges in beneficiary selection; and capacity constraint or inadequate capacity of the implementing agencies.
“Unless the above challenges are addressed, creating two crore homes may be a distant dream,” it cautions.
With regard to NPA ratio for housing loans, the report says that with the sharp rise in loan disbursements and the number of beneficiaries in the affordable housing segment, non-performing asset (NPA) ratios of public sector banks (PSBs) and housing finance companies (HFCs) have increased moderately in 2016-17. Among all slabs, housing loans up to Rs 2 lakh have had the highest level of NPAs and the PSBs reported higher NPAs than the HFCs in the last two fiscal years, the report says.
The report says that NPAs for housing loans of up to Rs 2 lakh stood at 11.9 percent for PSBs during 2016-2017 and 8.6 percent for housing finance companies during the same period. But for the above Rs 25 lakh segment, NPAs for housing loans stood at 1.2 percent for PSBs in 2016-2017 and at 0.5 percent for HFCs.
The report notes that while the total disbursement of housing loans by public sector banks (PSBs) as well as the housing finance companies (HFCs) witnessed a deceleration in 2016-17, there was significant growth for the lower slabs. Loans of above Rs 25 lakh declined marginally during the year, the report says.Housing loans up to Rs 10 lakh recorded robust growth in 2016-17, primarily driven by the PSBs. While the number of beneficiaries for loan amounts up to Rs 10 lakh has increased sharply in 2016-17, the number of beneficiaries for higher value loans of above Rs 25 lakh has, in fact, declined marginally during the year, it says.