A joint report titled ‘Affordable Housing in India’ by industry body CII and real estate consultant Knight Frank India pointed out that India is projected to face a cumulative shortage of 31.2 million affordable housing units by the year 2030.
The Centre is developing a government-supported credit guarantee system aimed at facilitating affordable home loans from institutional sources for workers in the informal sector, as stated by a senior government official recently.
“Currently, access to lower-cost home loans is primarily available to individuals with stable business income or salaries. Moreover, even those who can afford to make payments often require two years to establish a solid credit history. Therefore, we are in the process of creating a home loan product specifically designed for individuals employed in the informal sector, which will be underpinned by a government guarantee,” said Kuldeep Narayan, joint secretary at the Ministry of Housing and Urban Affairs.
Narayan was speaking at a conference organised by the Confederation of Indian Industry (CII) to mark the launch of a report titled ‘Affordable Housing in India: Demand-Supply Assessment and Financing Opportunity’.
The report published by CII in collaboration with real estate consultant Knight Frank indicates that India is projected to face a cumulative shortage of 31.2 million affordable housing units by the year 2030, representing a potential market value of ₹67 trillion.
Additionally, the report highlights a current deficit of 10.1 million affordable housing units, highlighting an increasing and pressing demand.
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The report further notes that recent interest rate increases have a disproportionate impact on affordable housing, as revealed by an analysis of lending rate fluctuations regulated by the Reserve Bank of India.
“During the Covid-19 pandemic, when lending rates were at a low point, the EMI/income ratio for the economically weaker section (EWS) stood at 43%. This figure has now escalated to 62%. This rise can be attributed to both the hikes in interest rates and the increase in prices. Importantly, this ratio surpasses the 50% fixed obligation to income ratio (FOIR) threshold established by the banking sector, thereby limiting home loan accessibility for EWS buyers,” the report stated.
The affordable housing segment also has several opportunities for financial institutions.
“Based on the assumption of a 77 per cent loan dependency and Loan-to-Value ratios applied at various loan thresholds, the potential financing opportunity for banks and Housing Finance Companies in the Affordable housing segment is estimated to be Rs 45 trillion,” the report said.
This represents a substantial increase, being three times more than the existing loan volume in this segment, it added.
Stressing on scale of operations, HDFC Capital MD and CEO Vipul Roongta said that the right marketing strategy for the affordable and mid-income housing segment is essential, as reported by PTI.
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Roongta said his company focuses on financing the middle and low-income housing segment, which it defines as homes below Rs 2 crore in Delhi and Mumbai and lower than Rs 1 crore in other cities.
He said the HDFC Capital has financed around 3 lakh homes.
Roongta said there is a need to position affordable homes in a better way.
He said the affordable homes can be small but not non-premium.
