‘Affordable housing’ aims at making use of residential real estate in urban areas at cheaper rates, to bring it within reach of those in lower and limited income range.

In the recent Budget, the Government had given a mandate to the National Housing Bank by increasing the allocation for the Rural Housing Fund and had earmarked ₹4,000 crore for providing cheaper credit to the urban poor opting for affordable housing. But things may not change soon for people looking for affordable homes.

One, low-cost housing is an area where private developers generally do not show much interest because of the low margins. For instance, in July 2014, the RBI announced easing financing options for affordable housing projects.

But so far, there have been only a few takers. Brands like Mahindra have launched their Mahindra Lifespaces’ affordable housing projects in Mumbai, under their vertical ‘Happiest’, ranging from ₹9.1 lakh to ₹17.5 lakh.

Although local builders are using the affordable tag, in many cases, they may just be bringing down additional charges like for car parking and club fee.

Two, the Government has not announced any direct measure in the Budget to increase the real estate industry’s access to cheaper finance. What all this means for low-cost home buyers is that only those who can demonstrate some form of documented income are likely to benefit. When it comes to home loans, post the Budget, banks have been allowed to add registration fees, stamp duty and other charges to the total cost of a house if it is valued up to ₹10 lakh.

This effectively relaxes the loan-to-value (LTV) ratio and will enable borrowers to get higher amounts sanctioned.

Some banks are operating home loan schemes under the label of affordable housing. For instance, Axis Bank runs a fixed rate home loan under the label, “loan for the affordable housing”, with 10.4 per cent rate for loans under ₹50 lakh. Muthoot Housing Finance Company is concentrating on small ticket housing loans at around 10.1 per cent in Tier 3 and 4 cities.

Such home loan rates are actually quite steep for the poor and lower middle class. These apart, no major steps have been taken by banks to fund affordable home buyers. Some PSBs like Union Bank have schemes for affordable housing, but the concession is only in the higher LTV (up to 95 per cent).

So while the “Housing for all by 2022” vision seems to be well intentioned, some key enablers are missing.

The writer is CEO, BankBazaar.com

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