Affordable housing push to grow loan book, sales: Experts

Government on Wednesday launched its 'Housing for All by 2022' mission and approved a substantial increase in interest relief on loan for the urban poor to promote affordable homes.

The Union Cabinet chaired by Prime Minister Narendra Modi accepted the recommendations of an Inter-Ministerial Committee to increase interest subvention to 6.50 per cent on housing loans to beneficiaries belonging to economic weaker section (EWS) including slum- dwellers and low income groups (LIGs).R Varadarajan, MD, Repco Home Finance and Amit Sarin Director & CEO, Anant Raj welcoming this development say they expect a boost in demand for affordable housing.Varadarajan expects his loan book to grow above the current rate of 25-30 percent. 80 percent of the company’s loan book is under affordable housing.Raj too sees a boost in sales of low cost housing.Below is the transcript of their interview Sonia: What has your own reaction been to what has come through from the cabinet, the fact that the interest payable will now be lower and will this in anyway aid demand?Varadarajan: Yes it is a very welcome step the government has taken. There is a huge necessity for improving the housing for the low cost sector and the policy of the government is also to provide housing for all by 2022. So, the government is going in the right direction and company like REPCO Home which is into affordable housing will also get the benefit because our average ticket size is only Rs 12 lakh right now. Moreover, this interest subvention scheme will generate huge demand and will improve the housing.Sonia: How much of your own loan book comes from the affordable housing sector and how much do you think demand could improve purely because of this?Varadarajan: More than 80 percent of my loan book is only under this affordable housing and it is going to generate at least- right now our loan growth rate is around 25-30 percent and I expect it will further boost my growth rate.Nigel: There is some news coming in terms of the interest rate subvention, what is your take on it? Is it going to be lower, do you think it is going to boost demand?Sarin: Definitely, this is a real welcome step here and we were all expecting it to happen, I am glad it has happened now. There is decent demand in this sector but this interest going down will further increase demand because these are low cost housing and lower interest rates will boost to the sales here.Sonia: You do have a big project in Neemrana, what is your own view on how much the demand could actually go up from here on because the interest payable will now become four percent from 4.9 percent. So, lower interest burden would that aid demand quite a bit or is demand in any case very sluggish and this interest cost reduction doesn’t matter?Sarin: Demand in this sector has always been there and in spite of whatever we have been going through for the past two years, demand has always been there. Our Neemrana project is a live example; fortunately or unfortunately we sold the complete project, so for this project I don’t think it is going to make much impact. We did about 3000 houses; all of them are sold now and we have started handing over possession.However, going forward it is going to give a good boost to the demand in the sector because like I just said, these are low cost houses and when the interest rate goes down, it further becomes more economical for the person to buy. So, this is a good step.