The numbers are scary. As an Indian Express story on March 19 revealed, a person who 18 months ago had taken a 7.5 per cent 20 year loan for Rs 20 lakh to buy a house and would be paying an EMI of Rs 16,111, would have his future generations paying it in perpetuity if the EMI did not rise. Because of the sharp and steady increase in home loan interest rates, from 7.5 per cent then to 11 per cent today, and assuming this householder did not want to increase EMI, tenure rises from 20 years when begun, to 30 years at 9.5 per cent to 70 years at an interest rate of 10 per cent. Beyond this rate, the interest component of the EMI (which comprises interest and principal) rises beyond Rs 16,111. Meaning, unless the EMI is increased, he will be in a perpetual debt trap.The implications are even scarier. We move ahead into a past most of us seem to have forgotten, say 1991 or thereabouts. That was a time when if one had forecast the creation and mushrooming of mass home ownership through housing finance, one would have been laughed out of any intellectual gathering. Bank credit was non-existent. Aspirations for ‘own home’ existed but were inevitably accepted as something one does when one retires. Households bought memberships in societies, and when they fructified a decade or two later, cobbled up money by breaking their fixed deposits, borrowing from family, neighbours and company, and of course used up their provident funds (a study shows that the average balance of PF is around Rs 30,000). Anything to get that roof.Zoom out and the macro-implications are even more intimidating, for they question the very basis of India’s collective aspirations to become a developed nation, where among many, many other tangibles and intangibles, homeownership is the rule rather than the exception, a right rather than a privilege. Indeed, if there is one indicator that would showcase the collective yearning of a billion-plus Indian citizens, it is homeownership. For, within it exist other needs and desires, from food and water to safety and security. This is the Indian Dream that will make Indians understand, respect and feel a part of the India growth story. The 10-per-cent-GDP-growth-with-low-inflation-and-high-employment-et-cetera is an abstraction that the aam aadmi does not and probably cannot decode — the fall in poverty to 21.8 per cent from 26.1 per cent announced by Planning Commission yesterday, for instance. What matters to him is what this abstraction does for him.Nothing can be bigger or have greater implications for a family than to have a house of its own. When that happens at a collective level, in millions and hundreds of millions, the social impact of an economic tangible becomes strong, acquires a critical mass, where each citizen feels that she or he is part of the growth story. He sees for himself that benefits of growth are not being burped out by merely the privileged, that he has a place in the new resurgent India. True, for now, this growth has been restricted to the middle class. But like any other socio-economic indicator, from access to drinking water and education to usage of TV and mobile phone, there is no way for it to go but to trickle down.It is this aspiration that is at stake today. What makes it worse is the fact that the Indian citizen has tasted blood. It was two years after the property crash of 1994-95 that liberalisation that was thus far restricted to companies and industries and for the individual to new jobs, finally entered his personal space by giving him access to finance. Around 1998, the recently rejuvenated home loan industry began to accelerate, racing ahead at a compounded annual rate of 35 per cent. Hundreds of thousands of individuals used this to buy houses. Studies showed how the average age of a borrower had fallen from over 50 to under 30. A large chunk of the Indian population celebrated.But to put these aspirations in perspective, it is important to know that over the past two decades, just 5 million households or around 1.5 per cent of all households have got this access. The problem is that policymakers are looking at housing as something that the wealthy do; the poor have to be content with food, water, education. To chase votes, if shelter for the poor is necessary, the attitude is to become a Robin Hood and hurt the rich — the recent hare-brained proposal to charge 10-20 per cent of the current value of a plot when the plot owner builds his house and term it ‘betterment levy’ to be used to create housing for urban poor is a coarse example of this approach.Instead, what the poor need is access — to finance. I suppose it is semantics that is holding it up. Somehow, the word ‘finance’ conjures up images of billions of dollars, crores of rupees. The images accompanying it are of the well-heeled. But look beyond and ask two questions: who needs the money and who is a good borrower? In both cases, the poor will come out tops. The success of microfinance in Bangladesh as well as in smaller pockets of India — the success in Ullon village in South Pargana, for instance — has shown that the poor are good borrowers. What they have is the will to convert sweat into wealth, howsoever small. All other issues, like collateral, rates of interest, services and suchlike are easily handled. It is important to know that what was once the ‘priority’ sector, is today a ‘profitable’ sector, and home loans find a place here.It should also be remembered that growth in the home loans industry has not come because the government mandated it. Yes, tax benefits helped but finally it was latent demand and matching supply that caused this growth. It is this growth that is at stake today — by the squeezing out of demand by increased interest rates on one side and no new supply on the other. No wonder, home aspirants are feeling homesick.
