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Affordable Housing Finance

Real Estate and Affordable Housing

15 January, 2018      Affordable Housing

 

Individual wealth in real estate is poised to double up in next 5 years. And the proportion of real estate wealth to the overall physical wealth would be staggering high riding over the fast creation of wealth in real state.

affordable housing finance
 

 

Individual wealth in real estate is poised to double up in next 5 years. And the proportion of real estate wealth to the overall physical wealth would be staggering high riding over the fast creation of wealth in real state. The Indian Real Estate industry is going through a metamorphosis on the account of ‘real demand’ driven mainly by Affordable Housing, growth in the Housing Finance and Govt. policy of ‘Housing for all’ initiative along with Real Estate reforms like RERA. This is not to be construed that the property prices shall double up infact the property prices shall reach the more optimum and correct growth rate.

Affordable housing Finance:

While the Housing Finance in India is growing at a CAGR of 18% in the last 5 years, the Affordable Housing finance is growing at a CAGR of 40%. The growth rate in Affordable Housing Finance is impressive even if one considers the small base. The latent demand of affordable housing is witnessing steep rise due to the emergence of ‘End Users’ who are the real customers, increase in the migration to urban areas or urbanization of rural areas, nuclearisation of families clubbed with regulatory and government support.

Housing Finance in India:

The penetration of Housing finance in India is hovering around 9% which is considerably low as compared with that of the developed countries. However due to potential of affordable housing coupled with Govt’s policy push which is attracting, both, the suppliers of housing and housing finance in India is expected to cross 20% in 3-5 years.

The affordable housing opportunity is realized by financiers as well as housing developers. Many Finance Institutions are existing for and are solely catering to this segment while all other banks / HFCs have opened their arms for this segment. While Developers have realized the huge end customer demand that translates into quick business for them they have also realized the benefit of tax sops & infra status providing to affordable housing by the Govt. of India.

Real Estate:

The real estate market noticed slackness in last 3-4 years, compared to earlier period, due to over-supply of premium housing and overall global economic slowdown. The slackness got attuned by the phased advent of Demonetization, GST and RERA however the industry is large enough to absorb such shocks which ultimately are going to prove key drivers of the real growth in real estate. While demonetization shall move a lot of working population to documented income papers, the GST shall bring in uniformity & lowering of cost due to input credit and RERA will boost transparency & buyer confidence. 

Challenges:

The 1.5 trillion affordable housing is poised to be 4X in almost 5 years from now driven mainly by the INR 10-15 Lac property segment. The increase in the urban population has surpassed the increase in the rural areas for the first time ever in India. The challenge however is to address financing on the informal property. Need is to attach formality to the informal property in order to bridge the Housing Demand and Finance supply. There is a huge segment with a mix of informal income and informal property that needs to be addressed to provide for Housing For All endeavor.