Low-cost affordable housing just got the push it needed from the policy front.

Bankers say it's time for them to focus on this segment, while developers say it's a recognition they had long been waiting for.

“Banks' performance in this segment needs to improve. The extension of one per cent interest subvention is a boost for low-income and mid-income buyers who need to be given the real support,” Mr M. Narendra, Chairman and Managing Director, Indian Overseas Bank, told Business Line .

Deployment of credit in this segment needs to be much higher from public sector banks, he said, adding that it was the non-banking finance companies which were addressing this segment better. “This will encourage increased real estate activity in new areas in semi-urban locations,” he explained.

Agreeing with him, Mr S.C. Sinha, Executive Director, Oriental Bank of Commerce, said that the interest subvention, which was introduced in last year's Budget, was instrumental in increasing demand for housing loans up to Rs 15 lakh in “C and D category cities and not in A and B cities”.

For housing finance company Dewan Housing Finance Ltd, fiscal year 2011-12 could see a 25-30 per cent growth in housing loans and about 75 per cent of the demand comes from tier-II and tier-III cities.

This is significant considering that the past 18 months have been a difficult period with many interest rate hikes and a resultant slump in some property markets, pointed out Mr Kapil Wadhawan, Chairman and Managing Director, DHFL. The average loan ticket size is about Rs 10 lakh.

Mr P.S. Jayakumar, Managing Director, Value & Budget Housing Corporation, promoted by Mr Jerry Rao, said that the number of references in the Budget gives the affordable segment a legitimacy and recognition, which will enable the sector get approvals faster. “This in turn will help address the supply side issues faced by this segment,” he added.

>anju@thehindu.co.in

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