While the overall growth in the housing sector is subdued, the low-income housing category has started to show a rise in activity. Sriram Kalyanaraman, MD and CEO of National Housing Bank, said that the low-income segment is witnessing some movement, both on supply and demand front. Stating that loans under Rs 10 lakh accounted for over 30 per cent of total loans in FY16, he pointed out that steps should be taken to bring the cost of houses further down. Excerpts:
Do you see any uptick in activity in the housing sector?
The industry’s focus is shifting towards affordable housing segment and even supply is coming in that segment. It is probably for the first time that loans of under Rs 10 lakh with both banks and HFCs (housing finance companies) accounted for over 30 per cent of the total loans. The loans grew at 19 per cent in FY16 and we expect the growth this year to be around 18-19 per cent. While people are buying houses, there is a rise in demand in middle and low segment.
There has also been a rise in interest from housing finance companies in the light of government’s focus on housing for all. NHB gave out 11 licences during the year as against 6 in the previous year and has another 8-10 in the pipeline. The interest has come primarily in light of Pradhan Mantri Awas Yojana (PMAY) and the incentives that the government is giving for low cost housing.
Are new HFCs focussing on small ticket loans ?
Most of the new HFCs are concentrating on middle and low-income houses and their business plans are also focussed towards it. They also seem to have cracked the underwriting for the informal income category. The advent of credit bureaus have helped many of them to underwrite more effectively. Many of them have taken up profile-based underwriting and are giving credit score based on your profile even though you may not have a credit history. So these are helping HFCs to underwrite the informal segment.
We are also running a fund with the World Bank only to address the informal segment and so far we have disbursed around $45 million from the $100 million fund and most of it has been used by HFCs.
What is the progress on the credit-linked subsidy scheme for low cost housing?
We have signed MoUs with 145 Primary Lending Institutions (PLIs) for implementation of credit-linked subsidy scheme all over the country and we have leased subsidy to PLIs, which includes banks, financial institutions and regional rural banks. It has benefited over 7,000 people. The total subsidy given amounts to Rs 119 crore under the scheme. While there was no target as it was the initial year, going forward we will have target beginning this year. We hope to double it this year.
What more can be done to make housing more affordable?
We are looking at how the stamp duty part of house can be brought down. Currently, it works in several parts including regular stamp duty and conveyance among others, and ranges between 6-12 per cent across states, which is very high. I think that pushing the stamp duty down will increase the number of transactions and then there should be no net loss of revenue for states. If we can rationalise it and bring it down to around 2 per cent all inclusive, it would help.
Illustratively, if the construction cost of a house is Rs 2,100 per sq ft, we can bring it down by doing a few things such as reducing the approval time from 3 years to 6 months and rationalising the stamp duty. The subsidised interest rate will bring it further down. I think all these should bring down the construction cost from Rs 2,100 per sq ft to Rs 1,600-1,700 which is a big saving for this segment.
NHB used to provide Residex data which indicated the price and demand trend across 26 major markets. Do you have plans to revive it?
We are reviewing and revamping the Residex data completely. We did not publish it last year because it was dependent on the agreements and we used to do an extrapolation to arrive at market value. However, there are pockets where there is a difference between agreement data and real data and so we are revamping it. Now we want to collect the macro data from the field and are finalising a partner to take it forward. Earlier, Residex used to come with 2007 as the base year, now we are trying to make it more recent with 2012 as the base year. We also want to couple it with other indices such as land price index, building material index and we are also going for housing rental index. We may be able to bring together Residex and other indices by Q1 2017 and it will help the customer know whether he should go for buying a house or for rent.
We will also be increasing the number of cities covered. While it will start with 29, with NCR getting split into 3, we will take it up to 50 in 2018.