The chronic housing shortage in India requires reforms in the banking sector and investment policies to achieve the government’s vision of ‘Housing for all’ by 2022.
“Currently, bank’s exposure to the realty sector is only 5 per cent and is way too small,” Sunil Mantri, President, National Real Estate Development Council (NAREDCO) told a press conference, adding that internationally, it was between 20 per cent and 25 per cent.
He said the sector had been facing a liquidity crunch and investment in the housing sector would have positive impacts on the entire economy.
NAREDCO has put forward an agenda that it expects will help developers raise investments as also promote low-cost housing.
“Firstly, an infrastructure status must be granted to the sector and the interest rate on retail loans should be brought down to 7 per cent. Besides, loans should be provided for acquiring land when it is used for affordable housing under the Reserve Bank of India (RBI) guidelines for prioritisation of home loans. Also, external commercial borrowings (ECB) should be allowed for the housing sector.”
On attracting foreign direct investment (FDI) in the sector, Mr. Mantri said that between 2008 and 2014, around $953 billion was invested in the real estate sector. Of this, household (personal savings and other borrowings) have contributed 72 per cent, institutional lending, including home loans (by banks and housing finance companies), accounted for 18 per cent followed by government, equity raising (private equity and capital markets) and private sector contributing 3 per cent each.
Overall, the real growth of investments in the sector has been less than 2 per cent in the last few years, he said.
Neeraj Bansal, Partner and Head, Real Estate and Construction, KPMG said, the time required to get housing development related approvals was between 2-4 years. ``Such delays block hefty investments which depending on the project location, range from 20-60 per cent of the total project cost and escalating the same in the range of 10-30 per cent. The government needs to streamline the approval mechanism by introducing single window clearance in the sector.’’
