Comments
The chicken-and-egg problem relating to the reluctance of builders to construct affordable homes as finance is not easily available to those in the lower income group and the lack of enthusiasm among lenders to take an exposure to this group due to concerns on creditworthiness as well as builders not coming up with projects for the group could get resolved in the coming months.
A catalyst
The Credit Guarantee Trust Fund for Low Income Housing, which will be floated jointly by the Central and State governments with an initial corpus of about Rs 1,000 crore, will act as a catalyst to bridge the gap between supply (builders and lenders) and demand (from low income segment), making it possible for those at the bottom of the pyramid to own a house, said a top National Housing Bank official.
NHB will be administering the Fund. The bank is the apex level financial institution that regulates and supervises housing finance companies (HFCs) and also provides refinance to commercial banks and HFCs in respect of home loans extended by them.
Once the Fund becomes operational, banks and HFCs will be encouraged to give home loans up to Rs 5 lakh to the low income segment without third party guarantee and without the fear of loans turning bad, according to NHB Chairman and Managing Director, Mr R. V. Verma.
If a home loan turns non-performing, then a lender can bank on the Fund to make good its exposure.
“Since risk weight on home loans for the low-income segment will be pegged lower, lenders will get capital relief. Hence, they will be able to offer home loans at lower interest rates. The affordable housing segment will gain momentum,” said Mr Verma.
There is a housing deficit of about 2.5 crore for the economically weaker and lower income groups, growing at the rate of about 3.6 lakh per annum, according to estimates of the Ministry of Housing and Urban Poverty Alleviation. The shortage of affordable housing is reaching critical proportions.
Central Registry
To prevent frauds involving multiple lending against the security of same property as well as fraudulent sale of property without disclosing the security interest over such property, the Government has operationalised a Central Registry with effect from March 31, 2011, said the NHB chief.
Records maintained by the Registry will be available for search by any lender or any other person desirous of dealing with the property.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.