The Hindu Business Line : ‘Ball is in developers’ court’

National Housing Bank, the refinance and development institution to support the housing sector, is pushing for the supply of affordable housing. There is a core demand for housing which is, for now, slow because of the current economic situation and unaffordable prices, says Mr S. Sridhar, Chairman, NHB. But affordable housing can stimulate demand and NHB, a subsidiary of the Reserve Bank of India, is taking steps to encourage affordable housing by supporting the banks, builders and home buyers.

The banks and the policy makers are doing their part in supporting the sector, it is up to the builders to take a progressive step, says Mr Sridhar.

Excerpts from an interview to Business Line:

Is the drop in home loan interest rates envisaged by the banks likely to stimulate demand?

Housing demand is a function of property prices and home loan interest rates. Banks are taking steps to bring down interest rates. Most banks have cut the Prime Lending Rates and with home loan rates in some way linked to PLR the rates are bound to come down.

There has been some correction in property prices but it is not widespread. There must be a perceptible fall to stimulate demand.

After all there is a core demand for housing.

Property prices need to come down to reduce the quantum of housing loan the buyers take. If not, the EMI would be too high irrespective of interest rates and buyers would find it unaffordable. The ball is now in the developers’ court — let them take steps by decreasing prices across the board. The prices of cement and steel are coming down.

Affordable housing projects have to start happening even if developers have to reduce their margins.

What is the National Housing Bank doing as a refinance and development finance institution?

We are looking at short-term and medium-term requirements.

In the current context of the drop in housing market, NHB has always maintained that developers should look at affordable housing as an essential business segment of operations. They cannot rely on the premium or upper segment of the market alone.

As a development bank, we are taking steps to encourage affordable housing, both from the demand side and supply side. We are also giving inputs for the policy measures needed to back this development.

For instance, NHB has proposed a concept of interest subsidy scheme for urban poor to the Government of India — we are piloting it. This would be to make homes affordable to the poor and lower income segment. Another is the mortgage guarantee scheme to bring down the risk for the banks.

What is the product that would support builders in offering affordable housing?

NHB is introducing a refinance scheme for banks to finance builders setting up affordable housing — it is a new programme. This will support projects in urban and rural areas when builders plan dwelling units with a carpet area of about 400 sq.ft — primarily a one-bedroom house of about 525-550 sq.ft. Many State Governments are insisting on developers earmarking space for the economically weaker section and low income group. NHB plans to support this policy initiative and encourage credit flow. This refinance will be available for slum redevelopment projects also.

But how affordable will the refinance be for banks? There have been concerns on the refinance rates offered by NHB?

Today, as far as the builders are concerned, the interest rates are higher than that of housing loans. So there is more headroom for an intermediary to come in. We finance banks at a particular rate, the banks will add their margins and lend to the builders. In providing refinance to lend to builders the margins are higher and there is a scope for it.

The product is on offer and there is a demand. Though we have not set a target, we will meet all eligible applications as we are interested in the development impact. We want more small flats to come up.

R. BALAJI

Responses to blproperty@thehindu.co.in

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