The Indian housing finance sector has been receiving pessimistic views in the recent past. It witnessed a growth slowdown and as per CRISIL, the AUM growth of housing finance companies halved in H2-FY2019.
But now, the worse is over and the industry is showing signs of revival. As per the experts from the housing finance and banking industries, the Indian government and the regulator have taken concrete steps to improve the conditions.
To discuss the prevailing conditions, immediate challenges and the prospects of growth in mid and long-term housing demand, IMGC and CNBC-TV18 held the second edition of the India Mortgage Leadership Conclave (IMLC) in Mumbai, where relevant stakeholders from the housing finance industry came together and spoke at length about the present and the future around theme Housing Finance: The Next Growth Opportunity.
The event holds significance in the present scenario as the sector is facing challenges such as liquidity crunch, stuck and delayed projects, land availability, demand shifts, trust deficit, among others.
The insightful event saw addresses by top minds of the industry, sessions, and more, where they expressed their viewpoints on the sector and its future.
In his welcome address, Mahesh Misra, CEO, India Mortgage Guarantee Corporation (IMGC), spoke about measures for reviving housing finance’s sector growth, government and regulator’s initiatives to improve the conditions, including other touchpoints.
“We have had five rate cuts in last 12 months. Housing finance regulation has converged with the Reserve Bank of India and it has two sets of benefits. Firstly, we can expect a more consistent, uniform regulation, which is likely to create a level-playing field with 58% of mortgage originations being done by banks, there was a case for regulation to move to the RBI. Secondly, this also leaves NHB with a far greater bandwidth to play the sponsor role for development of the housing finance sector and we already have a slew of government initiatives where NHB is the principal anchor,” he said.
He also lauded the Pradhan Mantri Awas Yojana (PMAY), adding that the top five lenders were optimistic about growth in affordable housing.
During the conclave, Amitabh Chaudhry, MD& CEO, Axis Bank said that both housing and real estate were extremely important sectors as they set the trend for economic growth, adding that as employment and consumption levels go up, the demand for housing goes up as well.
“While India’s GDP could increase by two-fold to $5trillion in the coming decade, which the government is aiming for, the housing finance industry, we believe, has to grow at a much faster pace. So, the question is whether India ready to witness the growth in the housing sector? India is very well poised to see major growth in housing finance in the coming decade,” he said.
Meanwhile, during a panel discussion on Housing Finance: The Evolving Landscape, industry stalwarts - RV Verma, Former Chairman& MD, National Housing Bank; Sathya Kalayansundaram, Country Head & MD, Experian India; Anirudh Kamani, MD& CEO, ICICI Home Finance; Deoshankar Tripathi, MD & CEO, Aadhar Housing; and Shreekant, Chief General Manager-Real Estate Housing, SBI deliberated on the present scenario, institution building in the housing finance sector, Real Estate (Regulation and Development) Act (RERA), Insolvency and Bankruptcy Code (IBC), market infrastructure development, risk mitigation, etc.
While they agreed that demand will grow, however, experts also pointed out that few structural changes were required to get the sector out of the crisis.
Recently, in a bid to help the real estate sector, Finance Minister Nirmala Sitharaman, recently, announced a housing booster of Rs 25,000 crore stress-fund for completion of stalled affordable and middle-income housing projects that haven’t been classified as NPAs.
In a one-on-one discussion, SBI Chairman Rajnish Kumar welcomed the move, saying it was need of the hour. Also, during the interaction, Kumar spoke about foreign funds investments in Indian real estate projects, uptick in transactions, adding that real estate markets in Hyderabad, Kolkata and Chennai were growing.
“We have conducted a study by a leading research firm, there is a pick-up, it is not uniform across the country. There are markets like Hyderabad, Kolkata, and Chennai that have grown. There is NCR, MMR where there is negative growth, with the worst affected region being NCR. Quarterly, the size of the market is about 70,000 odd units and if you take an average of about Rs 50-60 lakh, you are looking at a mortgage market of about Rs 2 lakh crore. It is not a bad scenario for us,” he said.
During the discussion, he also laid out his wish list.
“If the sector is to be helped and it may fall under the domain of state governments, affordability has to increase. The biggest hindrance in affordability is the cost of land the construction costs are not as high,” he added.
Kumar also said that the cost of the land and the duties or the charges on it made it a very costly affair and since affordability was an issue, some relief there would be a welcome move
One of the main aspects in the real estate sector is affordability. Since millions of Indians aspire to own homes, commercial and residential market will have to grow and become affordable. The market size is expected to increase, as at present, the Indian housing sector is just 9-10% of the GDP.
During his keynote address, HDFC Chairman Deepak Parekh shared his positive outlook of the Indian housing finance industry and spoke about liquidity crisis, trust deficit in the lending ecosystem, risk averseness of lenders affecting last mile funding for good developers, including other areas of concern.
Apart from affordable housing, another model which he expects to gain momentum is rental housing. As per Parekh, the Model Tenancy Act 2019 will boost rental housing, and among others, the niche housing will also see an uptrend
“I am very bullish since the market size is still very small, housing as a percentage of GDP is almost half of what China’s numbers are. There’s only one way that this industry will grow, which is up. There is no denying that there are pressing issues in the Indian real estate market and timeliness of action is the key to prevent haemorrhage. One cannot sugar coat that there is pain and the trust deficit is clogging the flow of liquidity to where it is needed the most,” said Parekh, adding, “Personally I do believe we can overcome this crisis of confidence if lenders are allowed one-time restructuring of certain real estate loans.”
Speaking about REITs, he said it was emerging as a preferred alternate investment avenue and realty firms may raise over $25billion in three years via REITs.
The conclave also saw address from Kevin Schneider, Executive Vice President and Chief Operating Officer, Genworth Mortgage Insurance who said that India’s housing market has immense growth potential. He said economic disruptions are an opportunity for both industry and institutions to address the weaknesses across the system whether it deals with development of alternative funding and liquidity channels such as securitisation; or assuring that a performance data and information is available to better understand the environment and the trends, and focussing on disciplined lending. He mentioned how the current situation is an opportunity for individual lenders to review governance structures and underwriting guidelines.
The India Mortgage Leadership Conclave (IMLC) threw interesting datapoints and views from the participants, who set the outlook for future of the housing finance sector.