ANALYSIS. New ‘Housing for All’ scheme on firmer ground

The Cabinet Committee on Economic Affairs (CCEA) last week approved Housing for All by 2022, a scheme promoting affordable housing for the poor in urban areas. The scheme provides an interest subvention of 6.5 per cent on housing loans to the economically weaker sections (EWS) and low-income groups (LIGs). The scheme is more comprehensive and addresses the shortcomings in the earlier schemes, say industry players.

First, the Centre will provide a grant of ₹1 lakh per beneficiary under the slum rehabilitation programme.

Next, central assistance of ₹1.5 lakh per house for the EWS category will be provided under both affordable housing and beneficiary-led individual house construction.

Also,, credit-linked interest subsidy of 6.5 per cent on housing loans taken up to a tenure of 15 years will be provided to the EWS and LIG categories. The subsidy will be paid upfront, on NPV (net present value) basis of ₹2.3 lakh per beneficiary.

“Under the new scheme, ₹2.3 lakh will be deducted from the loan amount and the balance will be serviced by the customers at the contracted or unsubsidised rate,” explains Sudhin Choksey, Managing Director of Gruh Finance.

So, will the new scheme succeed where the earlier schemes failed? Industry players feel that the new scheme addresses some of theearlier issues under interest subsidy for housing the urban poor (ISHUP) and the Rajiv Rinn Yojana. For one, the new scheme brings in more uniformity in calculation of interest subsidy.

“Under Rajiv Rinn, NHB and HUDCO were appointed nodal agencies and all banks and housing finance companies were supposed to claim their subsidy through them. But each had to formulate their own workings depending on the loan amount,” says Sudhin Choksey.

Two, the scheme raised the income ceilings for both EWS and LIG categories. Earlier, urban poor with an annual income of up to ₹1 lakh was defined as EWS and up to ₹2 lakh was categorised as LIG. The income ceilings have been increased now to ₹3 lakh for EWS and ₹6 lakh for LIG, which brings more people under the ambit and makes it more viable for lenders and developers to cater to this segment. “ISHUP scheme became non-viable because only the very poor qualified for the interest subsidy. So lenders were not willing to extend loans to this section. Developers were also reluctant to construct for such low income households,” adds Choksey.

Players feel that the challenge lies in the title of the land. “There is lot of suppressed demand but the challenge for HFCs is the title of the land. Many people who have taken up space in the cities do not actually own the piece of land they are occupying.

“So the government has to legalise their space by providing clear title. Then it becomes easier to fund them,” says Srinivas Acharya, Managing Director of Sundaram BNP Paribas Home Finance.

In large-scale urban housing, the government has to provide single-window clearance, he adds.

There are other issues too that need to be ironed out.

In the past, lack of coordination between the Centre and the States has hindered the progress of such welfare schemes. While housing for all is a national agenda, land is a State issue and needs proper coordination between the Centre and the States.

“Each State will have to enter into an MoU with the Centre and identify which land can be put up for development,” says Choksey.

For HFCs, particularly those providing small ticket home loans to low-income group, the new scheme opens up more opportunities.

Gruh Finance is one of the pioneers in the rural housing finance segment, and remains the player with the smallest loan ticket size of about ₹8 lakh.

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