A booster shot for low-cost housing
The announcement of setting up of Mortgage Risk Guarantee Fund in this year’s budget is slated to add some momentum to the affordable housing segment which is the need of the hour. In want of this there was a relunctance amidst developers to take up low – cost housing. Now with the setting up of this fund developers need not fear of losing the amount even if the loan turns bad for some reason.
Indeed past few years have seen tremendous economic growth in the country by way of implementation of some successful anti-poverty programs in the country. While 93 percent of the total population in 1985 was under deprived category, this declined to 54 percent of total population in 2005 and is expected to further decline to 22% by 2025.
Setting up of Mortgage Risk Guarantee Fund is another such step in the direction.
There is a housing deficit of about 2.5 crore for the economically weaker and lower income groups which is growing at the rate of about 3.6 lakhs per annum, according to the Ministry of Housing and Urban Poverty alleviation. The shortage of affordable housing is reaching critical proportions. Thus it was very important that Government takes such initiatives which can motivate developers to take up such projects on priority.
Accordinlgy in the 2011-12 budget, the government issued proposals in housing finance considering the increasing burden on the people due to the rise in inflation by way of liberalising the existing scheme of interest subvention of 1 per cent on housing loans. Also, existing housing loan limit has been increased to Rs 25 lakh for dwelling units under priority sector lending, thus lifting the battered realty sector as demand will rise after such proposal.
In additon the provision for Rural Housing Fund lifted to Rs 3,000 crore. It was expected earlier, that housing could act as equilibrium between helping banks increase liquidity and helping citizens to cope with inflation.
The major step came towards enhancing the credit worthiness of economically weaker sections and LIG households by way of setting up of a Mortgage Risk Guarantee Fund to be created under Rajiv Awas Yojanaa and Central Electronic Registry to prevent frauds involving multiple lending on the same immovable property which is operational now.
This Fund for low Income Housing will be floated jointly by the Central and State Governments with an initial corpus of about Rs. 1000 crore, to 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.
It will be administered by National Housing Bank which is the apex level financial institution that regulates and supervises the Housing Finance Companies 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 upto Rs. 5 lacs to the low income segment without third party guarantee and without the fear of loans turning bad.
Hope the times will transform and affordable housing will roll…after lying low for so many years. More such initiatives are welcome!
(The author,Bienu Vaghela, is the Chief Editor of Apnapaisa.com)