Money & Banking

Demand for housing back in lower income, middle income segments: NHB

KR Srivats New Delhi | Updated on April 18, 2021

Recommends lowering/waiver of stamp duty

The slowdown induced by the Covid-19 pandemic notwithstanding, the housing finance sector maintained positive growth with outstanding individual housing loans of banks and HFCs registering year-on-year growth of 8.5 per cent and 3 per cent, respectively, in September 2020, a report by National Housing Bank (NHB) has revealed.

The rising refinance offtake and sanctions by Housing Finance Companies (HFC) so far indicate the demand for housing is back in the market, both in lower income and middle income segments, it noted.

Stamp duty

This report, ‘Trend and Progress of Housing in India 2020’, has recommended that State governments should consider rationalising or waiving off stamp duty and registration charges for affordable housing units.

Lower property prices on account of reduction/waiver in stamp duty/registration charges will induce more people to purchase affordable housing, thus compensating for the revenue foregone by the State on account of rationalisation or waiver of such duties, it said.

Backed by government policies and support measures, rising population and increasing urbanisation, India presents a very conducive environment for affordable housing, the report added.

The report highlighted that the onset of the pandemic and the ensuing lockdown have shifted the consumer preferences towards affordability. Affordable segment housing will continue to remain in demand, as home buyers having an appetite for new property purchases will look to rationalise their quantum of investments, it added.

The housing finance market in India is one of the most important contributor of GDP growth the overall share of individual housing loans of HFCs and banks combined to GDP (at market price) stood at 9.9 per cent at the end of 2019-20 with an outstanding of over ₹20-lakh crore.

The report highlighted that housing finance industry post-Covid-19 is faced with multiple opportunities created by a host of measures announced to overcome the impact of pandemic as well as the new market dynamics that emerged post-Covid-19 crisis. The various liquidity measures announced to boost the economic activity in India has led to decline in the cost of funds resulting in lowering of interest rate and reduced EMI burden for the customers which has made the proposition of availing housing loans very lucrative, the NHB report said.

The lower rates coupled with stagnant housing prices have led to increase in the affordability. “We think housing finance disbursement is gaining momentum, allowing housing finance companies to collaborate with banks to undertake priority sector lending has further provided greater operational flexibility to the lending institutions. The co-lending model will leverage the competitive advantage of banks and HFCs in a collaborative effort and make available funds to the ultimate beneficiary an affordable cost, considering the lower cost of funds from banks and greater reach of the HFCs,” it added.

With gradual lifting of lockdown measures and reopening of economy, the housing finance activity is on the trajectory of revival. Distinct signs of green shoots in housing finance sector witnessed in the month on month improved credit offtake from HFCs. Home loan disbursements by HFCs during September 2020 are also better at 105 per cent compared to September 2019. During the period April to September 2020, the NHB refinance disbursements registered an exceptional growth of 263 per cent at ₹24,947 crore compared to ₹6,869 crore during April 2019 to September 2019.

Published on April 16, 2021

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