15 October 2018

Table of Contents for Cover Story

Cover Story


Right now Affordable Housing has acquired a political hue in view of the unfolding political reality. However, the Affordable segment is RERAing to go and REITS, InvITs, will open up the market. But the Regulatory environment needs to be fine tuned to prevent unscrupulous builder-developers from sponging off the sops available to Affordable’s Infra status……..cautions SATISH P CHAVAN

As India goes to the General Assembly polls in 2019, Prime Minister Narendra Modi’s pet scheme, ‘Housing for all by 2022,’ has come into the spotlight, due to the ruling party’s political expediency. It augurs well all around, to all Stake Holders across the value chain. The most impoverished segment living below the poverty line will get a decent house, government initiatives will roll out mega housing projects required urgently to cope up with India’s unprecedented urbanisation, this will generate plenty Greenfield projects for the entire builder fraternity including contractors, builder-developers and the labor market and affordable’s infra status will make it lucrative and kick start private participation in the segment.
The demand drivers and enablers are also in place. A robust economy, a galloping urban population, rising incomes in urban and rural economies and home loans available due to priority lending classification, will all ensure that the affordable pie realises its full potential as a long term growth story. Affordable housing will also grow into a major growth engine for the economy.
However, Regulatory challenges and major hurdles on the ground need to be resolved to ensure proper implementation of the mega housing scheme. Around October three construction projects under the Pradhan Mantri Awas Yojana (PMAY), in the Mumbai have now been shelved. They were earlier granted locational clearance for building 6,415 low-cost houses at these sites, but now it has now emerged that the lands in question were already reserved for other public purposes. Another 50-hectare plot in Vasai’s Juchandra was cleared for building 3,630 low-cost homes, but it seems the land has a dense mangrove cover and has the status of a “reserved forest.” With no development permissible on the plot due to its eco-sensitive belt, Maharashtra Housing and Area Development Authority (MHADA), the nodal agency implementing PMAY the Urban Development Department(UDD) for changing the plot’s land use, the latter declined the request citing environmental loss.
Another 11-hectare plot in Khalapur, Raigad, cleared by the Centre for building 2,685 low-cost homes, was already reserved for a recreational open space and public institutional space. The UDD locked this proposal too on environmental grounds.
There are several other hurdles for the affordable segment including; Regulatory and Environmental land acquisition issues and housing finance home loan issues on the buyer side.


Initiatives such as PMAY, Urban Rejuvenation Scheme – AMRUT and the 100 Smart Cities’ Mission will provide emerging cities with a blueprint for becoming the next flag bearers of affordable housing in India. According to a recently published white paper by RNCOS, ‘India Affordable Housing Market,’ India has seen whopping population growth and unprecedented migration to cities, leaving a huge housing deficit to accommodate this migrating population. Pan India, there is a shortfall of over 18 million housing units, 96 per cent of which is among Economically Weaker Sections (EWS) and Lower Income Groups (LIG) people. This urban housing deficit is projected to grow at a CAGR of 6.6 per cent till 2022. In the top 5 states, Maharashtra alone had a shortage of around 1.2 Million houses and demand of 1.6 Million houses in 2015. Another report ‘The Dawn of India’s Future Cities,’ released by Confederation of Real Estate Developers Association of India (CREDAI) and co-authored by JLL India released recently at the ‘New India Summit,’ held in Nagpur, underlines need for new urban centers in India and shortlists 45 potential mega cities such as Nagpur, Lucknow, Jaipur, Kochi and Bhopal, amongst others, who are projected to drive demand for affordable housing in India. The findings are based on key parameters like Socio-Economic Momentum, Enhanced Connectivity Infrastructure and High Value Indicators. With a sharp-focus on real estate, it identifies areas of opportunities for developers while reiterating impact of regulatory changes on the sector.
“India’s demographic capabilities and potential bring with them a huge opportunity to match the world’s largest economic superpowers. This opportunity also brings with it challenges such as developing new urban centers to lead India’s economic charge and creating appropriate employment opportunities. There is undoubted potential in India’s Tier II, III & IV cities and it is imperative that we leverage this opportunity to the maximum extent. Through its New India Summit, CREDAI aims to contribute to building a New India during this relatively slow growth period of the Indian real estate industry,” lectured Jaxay Shah, President, CREDAI.
“The New India Summit forum allows us to effectively gauge the capabilities and potential of India’s Tier II, III & IV cities. The Tier I cities are already overcrowded and their resources are being exploited to a great extent. There is a clear need for new cities to be developed as the growth engines of the country. We fully support the Government’s initiatives such as the 100 Smart Cities program and AMRUT, which are steps in the right direction towards the progress of the country. We will continue to align our initiatives with those of the Government to further our country’s advancement, ” agrees Getamber Anand, Chairman, CREDAI.
‘The Dawn of India’s Future Cities’ underline India’s need for new cities to augment its economic growth and leverage its promising demographics. Driven by investments in infrastructure, affordable housing and skilled workforces, these cities can potentially see accelerated growth in Manufacturing/Industrial, Tourism and Warehousing sectors.
On occasion of releasing the report ‘NCR - An Affordable Housing Goldmine,’ Anuj Puri, Chairman - ANAROCK Property Consultants, comments, "Affordable housing has once again taken centre-stage in all real estate forum discussion and deservedly has the undivided attention of all industry stakeholders including developers, investors, customers and the Government. As India's largest urban agglomeration, Delhi-NCR is extremely important from every perspective - not least of all since it contributes as much as 7-8 per cent of India’s total GDP. The region's sheer size and exponential growth bring forth an immediate and ever-escalating requirement for affordable housing. This report takes a deep-dive into how appropriately the region's real estate sector has been able to address this requirement - and what factors aid or hinder this response."


RERA will give home buyers the upper hand and REITS and InvITs, will open the home loans market. Affordable segment is getting policy support and tax incentives, reducing interest burden significantly on home loans. As per PMAY, home loan EMIs will get lower by up to 45 per cent for EWS and LIG applicants. CRISIL defines affordable housing loans as those with a ticket size less than Rs.15 lakh and says pure-play ‘Affordable Housing Finance Companies’ (AFHCs) have been on a tear, with their assets under management (AUM) rocketing 50 per cent in the past fiscal to Rs.23,000 crore as on March 31, 2017, compared with Rs.15,000 crore as on March 31, 2016. Consequently there is an increase in market share of AFHC in the overall affordable housing finance, from 10 per cent as on March 31, 2016, to 15 per cent as on March 31, 2017.
“We expect AUMs of the new AHFCs to clock 40 per cent CAGR over next four years, compared with 17-18 per cent expected for the housing finance sector as a whole. A quarter of home loans today are for affordable housing, driven by a plethora of facilitations,” assesses Krishnan Sitaraman, Senior Director, CRISIL Ratings.
Facilitations spurring growth include government’s ‘Housing for All by 2022’ and PMAY initiatives, grant of infrastructure status to affordable housing, allowing additional investment limits to debt mutual funds to invest in housing finance companies (HFCs) and lower risk weights for smaller-ticket housing loans. The upshot has been three-pronged: existing players have seen capital infusions, more new players are entering the fray and for borrowers, affordability has improved. Over Rs.2,000 crore of capital has been infused over past five years into AHFCs, with PEs quadrupling from 4 to 18. CRISIL says these AHFCs will need another Rs.1500 crore of capital over next three years to meet growth estimates. The underlying borrower profile, coupled with limited financial flexibility of borrowers, leads to potentially higher volatility in portfolio performance, as evident in the two-year lagged gross non-performing assets of 3 per cent, compared to 1 per cent for overall housing finance sector.
“While government initiatives and huge market opportunity continue to make the segment attractive, institutionalisation of appropriate origination, credit assessment and underwriting practices and human resources, will be defining elements for long-term sustainability in affordable housing finance space,” says Malvika Bhotika, Associate Director, CRISIL Ratings.
Most major banks and Housing Finance Companies (HFC) have launched major ‘Affordable’ home loan schemes to fund home purchases from LIG and EWS groups. Some recent initiatives include;


SBI Hamara Ghar
Recently, CREDAI launched 373 Affordable Housing projects through member developers across India for providing 2.33 lakh housing units, involving investments of over Rs.70,000 crore. It signed a 3 year MoU with SBI, specifically for affordable housing projects. SBI will provide easy construction finance to CREDAI member developers for eligible affordable housing projects at concessional interest rates. It will facilitate bi directional incentives for customers and developers. For CREDAI members, SBI will provide an interest concession up to 35 bps to eligible builders for construction finance. For the consumers, SBI has launched an exclusive tailor made scheme, “SBI Hamara Ghar” enabling buyers to avail home loan for these projects.“SBI is the largest affordable housing financer in the country. It’s a special moment for us to partner with CREDAI for affordable housing aimed at achieving national mission of ‘Home for all by 2022.’ This initiative will help millions of home buyers fulfill their dream of owning a home. In the long run, it will give a boost to the real estate industry and economy as a whole, elevating the citizens from aspirants to actual home owners,” explained Rajnish Kumar - MD (NBG), SBI.
“Our Association with SBI brings us one step closer to fulfill our promise of providing a home to the masses, elevate their quality of life and reduce the repercussions of not having a permanent home or not being able to afford one. Our members have taken a lead in the Housing for All mission which showcases our commitment to this cause. We believe that this movement will only gain momentum in coming months which will not only provide a robust support to our economy but will also expedite employment generation substantially. Rebate on construction finance by SBI will be instrumental in facilitating a more affordable ecosystem which will lower the construction costs and enable the developers to pass on the benefits to the consumers,” adds Jaxay Shah.


Axis Bank’s affordable Shubh Aarambh
  • Industry-first initiative
  • Non-Defaulters get 12 EMI waiver
  • 4 EMIs X 4 Quarters
Axis Bank, India’s third largest private sector bank, offers 12emis off on ‘affordable housing’ loan bouquet,– Shubh Aarambh, an industry-first in home loans to expand its footprint in affordable housing segment . Customers with regular repayments to receive waiver of 12 EMIs – 4 EMIs each at the end of 4th, 8th and 12th year. It will enable borrowers applying for loans up to Rs.30 lakhs to avail additional benefit of 12 EMIs waiver. The effect of EMI waiver shall be given in the form of reduction in tenure.
“The government’s efforts in boosting the affordable housing segment has been relentless and Axis Bank feels privileged to be a constant partner in this initiative. Through these products we aim to provide further value addition to our customers in a highly competitive environment and at no incremental cost. This would also encourage regular repayments by the customer,” explained Rajiv Anand, Executive Director – Retail Banking, Axis Bank, while launching the scheme.
The loans can be used to purchase an under construction/ready/resale house, self-construction and plot + construction. Customers also have option to transfer any existing home loans to Axis Bank without any additional cost.




Large-scale urban developments are becoming increasingly difficult due to lack of land parcels, congested transit routes, lack of finance, rising input costs and regulatory hurdles. However, it is vital that these issues are addressed urgently so that a comprehensive framework can be established in ensuring the development of affordable housing. Once the Regulatory environment for Affordable segment is fine tuned, including a friendly GST regime, Affordable Housing stocks on the share market will gain valuations.
“Find those companies which are suppliers to affordable housing, which are completely diversified in terms of supply to multiple other industries—where they will be able to benefit from the overall infrastructure spending,” advises Samit Vartak, Chief Investment Officer, SageOne Investment Advisors and adds, “Even if the economy doesn’t pick up, those companies will still do better than the others.”

Leave a Comment

Email Address
(will not be published)