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Supply-side finance needs to be strengthened to make affordable housing successful


New Delhi, March 7, 2017: On the second day of the CREDAI Conclave, a whitepaper released jointly by CREDAI and real estate services firm CBRE, gave a positive outlook to the real estate industry saying that the impact of an unprecedented measure like demonetization had only a short-term impact, noting that the industry was already moving towards increased transparency and governance reforms. The whitepaper also said that the sector was likely to witness the inflow of more formal sources of capital, with institutional capital likely to be infused into the sector in the longer term.

Successive expert panels discussed the granularities associated with housing sector financing. While according infrastructure status to affordable housing was hailed as a landmark move, issues relating to access to funding, consolidation of housing demand, dearth of distribution infrastructure for loan disbursements to low-income category of consumers still exist, experts noted. These issues were discussed in a panel moderate by Sh. Gaurav Kumar, MD of real estate analytics firm CBRE.

Earlier, Sh. Manoj Gaur, President of CREDAI-NCR noted, “With increased interest in affordable housing, the sector needs more support from banks and housing finance companies to achieve the 2022 vision of Housing of all. Due to low margins, we need special facilities from partners to fund construction. With infra status the new budget has cleared a funding roadblock and we look forward to availing the facilities given for infrastructure, as acquiring land and approvals after RERA may take one and a half years. We will be completely compliant with the definition of affordable housing when planning projects, and leave no room for interpretation.”

Sh. Mukesh Patel, Member CREDAI and MD of Neelkanth Developers, highlighted the fact that while the quantity of housing needed in India was immense, there was no mechanism by which developers could access useful information to pinpoint where the demand exists. He said, “There are 20 million homes needed in urban India and nearly 40 million homes needed in rural area. The government has asked the industry to participate and the industry is clear that this vision needs to be seen through. However, resorting to increasing the Floor Space Index (FSI) to meet the demand, is not the only solution. We do not want a situation where developers build projects beyond the capacity of the market to absorb, while incurring cost overruns and ultimately building large projects which are hard to maintain in the long-Access to a consolidated national database to estimate location-specific demand would help ease this issue.”

Speaking on availability of cheap financing for affordable housing, Sh. Vipul Roongta, Managing Director & CEO, HDFC Capital Advisors Limited, said: “The volume of conversation around affordable housing has creating both momentum and expectations from the real estate sector. Scalability and standardisation are essential to bring down the cost of business, overall success, and winning the interest of investors. While scheduled commercial banks and infra both do not include lending for land, funding for construction and overheads can come from banks and financial institutions. Cheaper capital, at 8 to 8.5% is already being provided to developers based on their corporate ratings.  Bonds and rated security financial instruments are viable for financing cheaper capital, and also from a tax perspective.”


The panel also discussed that it was important to understand the needs of the affordable housing segment from the perspective of the consumer. Prof. Amita Bhide, Professor and Dean, School of Habitat Studies, Tata Institute of Social Sciences, said, “The Economically Weaker segment is not a marketable demographic for real estate. Employment preference is a key element of housing, as home owners look for homes near their homes. Recipients of affordable housing segment are often in unorganised, or self- employed segment. They require funding mechanisms from financial institutions.”

She further added, “The environmental impact of constructed stock which may lie idle must be considered. To address this, demand must be consolidated into a database and demand must be analysed. This will prevent a construction ‘mania’. Affordable housing construction must focus on the need for new housing first and foremost, instead of demand to replace inadequate housing or dilapidation.”