Affordable home finance companies growing
Loans for affordable housing have seen sharp growth in less than five years. Home loans by affordable housing finance companies have grown from Rs 1,000 crore as of March 2013 to Rs 27,000 crore as of December 2017. This has led to an explosion in housing finance companies (HFCs) focusing on the small-ticket segment. As many as 26 HFCs have registered with the National Housing Bank with self-constructed homes accounting for bulk of the loans. There are 77 registered HFCs, of which 26 are focused exclusively on affordable housing. According to the ‘State of affordable housing 2018’ report by FSG Consulting, one of the drivers of growth in this segment was the credit-linked subsidy (CLS) under the Pradhan Mantri Awas Yojana (PMAY) that provides an upfront reduction of up to Rs 2.67 lakh for a loan of Rs 6 lakh. There is also a problem in the incentive structure for HFCs. Under present norms, if the loan is below Rs 6 lakh, the HFC cannot charge a processing fee, and gets only a flat fee of Rs 3,000. HFCs are therefore not keen on seeing the home loan amount go down below Rs 6 lakh. According to the report, 14 million urban households (17% of urban India) live in slums. Many have the financial resources and willingness to improve or extend their homes. They would like a three–five-year loan of Rs 1–3 lakh to do so. While no lender is currently providing such loans, some affordable HFCs and several other lenders are eyeing this space.
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