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Easy and dedicated access to institutional financing, higher limit on external commercial borrowings (ECB) will attract more investments and assure sustained growth of affordable housing in India, making it the core driving segment for real estate, said Sriram Kalyanaraman, managing director & CEO, National Housing Bank at an ASSOCHAM event on Thursday.
The Foreign Direct Investment (FDI) and Foreign Institutional Investors (FIIs) will play a key role in boosting supply of houses and infra projects in urban areas, he said inaugurating an ASSOCHAM National Summit on Housing Finance for All.
Long term financing at lower rates will reduce costs of construction for developers allowing them to pass on benefits to consumers. Also, in India there is a need to develop a secondary mortgage market either in the form of RMBS (Reverse Mortgage Backed Securities) or Covered Bonds. Simplification of external commercial borrowing (ECB) guidelines has opened a new window of funding for housing finance companies in India, increasing the prospects of a fresh round of overseas borrowings.
The Real Estate Investment Trust (REIT) is another instrument that has potential to transform the Indian real estate sector, especially in commercial real estate and rental housing. The advent of REITs in India has been greeted with a lot of enthusiasm by many market players.
“For addressing these issues, the Government has taken various steps to improve urban infrastructure like Swachh Bharat Mission (SBM, urban), Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Heritage City Development and Augmentation Yojana (HRIDAY), Smart Cities, and Housing for All Mission. Under the Smart Cities Mission, 99 cities have been selected with a total outlay of Rs. 2.04 lakh crore ($31 billion),” he said.
“The challenges that this sector faces are multidimensional and require the support of all stakeholders. They can be summarized as 3A’s (Availability, Accessibility and Affordability), and Sustainability. Availability of long term low cost fund is still the biggest challenge for the housing sector,” he said.
The Government has accorded top priority for housing and put it on a growth trajectory not only by offering tax and fiscal incentives for builders and consumers, but also through structural reforms and single window clearance to improve transparency and disclosures to attract domestic and foreign investments.
The Union Budget 2018-19 affirmed the thrust on promoting affordable housing, by announcing the establishment of a dedicated Affordable Housing Fund (AHF) in National Housing Bank, funded from priority sector lending shortfall and fully serviced bonds authorized by the Government of India. This will make available low cost long term fund for financing affordable housing, he said.
For PMAY (U), the Union Budget 2018-19 has provided Rs 6,500 crore through Gross Budgetary Support and Rs. 25,000 crore through Internal and Extra Budgetary Resources under the Ministry of Housing and Urban Affairs (MoHUA). Comparing the quantum of requirement, this would require to be supported by market investment on a large scale.
Further with the grant of Infrastructure status to Affordable Housing and the implementation of Pradhan Manti Awas Yojana (PMAY) under Housing for All by 2022 Mission are some of the proactive decisions taken by the Government to usher affordable housing into a new era. The PMAY will provide a big boost to the housing sector, enabling million households to own a roof, especially those living at the bottom of the pyramid, he said.
Under the PMAY (U), the MoHUA has sanctioned construction of 44.35 lakh affordable houses for urban poor with an investment of Rs 2.5 lakh crore, with a central assistance of Rs. 68,416 crore. In 2018-19 alone, the government aims to construct 37 lakh houses for Economically Weaker Section (EWS) and Low Income Group (LIG) segments of people under the Scheme. If an average house under this Scheme is costing Rs. 10 lakh with Centre and State Government’s subsidy component of about Rs. 4 lakh, it would amount to investment requirement of about Rs. 2.2 lakh crore in FY 2018-19 itself.
Pradhan MantriAwaasYojana (Gramin) has been made effective from April 1, 2016 with immediate objective to cover 1 crore households living in kutcha house/dilapidated houses in three years 2016-19. The minimum size of the house has been increased to 25 sq. m. (earlier 20 sq. m.) with a hygienic cooking space. As stated in the Union Budget, under the PMAY (Gramin), 49 lakh houses will be constructed and the outlay for the programme stands at Rs 33,000 crore.
“While the progress made in housing sector development is commendable, it must be driven at an accelerated pace hereon. We - financiers, builders, banks -must accelerate our efforts in achieving the goal of housing for all," Ravindra Sudhakar, co-chairman, ASSOCHAM National Council on Affordable Housing and Executive Director & CEO, Reliance Home Finance Limited said.
He also suggested that the area caveat be done away with so that more people could benefit from the CLSS scheme. Also, buyers wanting to upgrade their houses should also be allowed to avail the benefit. "While the income caveat should remain, those wanting to upgrade to bigger homes should be allowed to avail of the benefits under the scheme. This would be a large number, almost double of the current number," says Sudhakar.
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