The three basic needs of human are food, clothing and shelter. Shelter is a prime necessity to ensure basic standards of living. To help people, especially those who can’t afford to get their dream home, the Indian Government has taken significant steps by launching a scheme called the Pradhan Mantri Awas Yojna (PMAY). In 2015, the NDA government had started a housing solution with an aim of ‘Housing For All’ (HFA) by the year 2022. Due to such schemes, India’s banks are focusing on affordable housing to take advantage of incentives offered by government to buyers.
In the affordable housing push, India’s largest lender – The State Bank of India, SBI, has reduced rates on home loans of up to 30 Lakh by 25 basis points for new borrowers to achieve the goal of HFA. It is the second time that SBI has cut down home loan rates in 2017; the rate is now reduced from 8.60% to 8.35% for new borrowers. For loans ranging from Rs 30 Lakh to Rs 75 Lakh, SBI has slashed rates by 10 basis points. Recently, SBI tied up with the Confederation of Real Estate Developers’ Associations of India to offer concessional loans for affordable housing projects after the association launched 375 affordable housing projects across India. As per the statement by SBI, “eligible home loan customers can avail of an interest subsidy of Rs2.67 lakh under the Pradhan Mantri Awas Yojana scheme.” It also said that it had come out with special offerings for construction finance to builders of affordable homes.
According surveys conducted, India has a housing shortage of over 62.5 million units. In 2017’s budget, the government gave infrastructure status to affordable housing in order to enhance funding access and increase investment. This increased budget allocation for housing was Rs 23,000 crore for rural housing and urban housing allocation was 22% higher at Rs 6,000 crore. According to Crisil Ratings, the number of housing finance companies raised from 55 in fiscal 2014 to 70 in fiscal 2016. Additionally, around 80 licenses are pending with National Housing Bank.
The Ratings agency estimates that the affordable housing segment is worth Rs 1.6 trillion, about a quarter of the overall housing loan market. It expects housing finance firms that focus on affordable housing to grow loan books at an annual average of 40% for next three years. There is enough space for both banks and non-banking financial companies to grow.
Other banks are also getting aggressive on the affordable housing sector. For instance, earlier this month, Indian Bank said it was raising Rs 5,000 crore to specifically finance infrastructure and affordable housing projects. The buzz around affordable housing is attracting new entrants into this market as well.
This is leading to an overall up-tick in the Real Estate Market of India.