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Housing is one of the basic needs of mankind in terms of safety,
security, self-esteem, social status, cultural identity,
satisfaction and achievement. It is one of the major determinants of
economic well being. The development of satisfactory housing has
always been the priority in both policy formulation and its
execution. (Source: NHB Annual Report)
The importance of the Real Estate sector, as an engine of the
nation’s growth, can be gauged from the fact that it is the second
largest employer next only to agriculture and its size is close to
USD 12 billion and grows at about 30% per annum. Five per cent of
the country’s GDP is contributed by the housing sector. In the
coming years this contribution to the GDP is expected to rise to 6%.
The Real Estate Industry has significant linkages with several other
sectors of the economy and over 250 associated industries. One Rupee
invested
in this sector results in 78 paise being added to the GDP of the
State. A unit increase in expenditure in this sector has a
multiplier effect and the capacity to generate income as high as
five times. If the economy grows at the rate of 10% the housing
sector has the capacity to grow at 14% and generate 3.2 million new
jobs over a decade. (Source : FICCI suggestion on Housing Sector).
The housing sector should not be envisaged as a mere demand-supply
problem. There is bound to be a wide gap between the demand for
houses and the need for houses, because of inequitable income
distribution in our country; the need is translated into demand only
when it is backed by the purchasing power. The phenomenal increase
in purchasing power especially in urban areas because of the
employment expansion in information technology (IT), information
technology enabled services (ITES), business process outsourcing (BPO)
and other services and manufacturing sectors provided the impetus to
the housing finance sector and it continued to grow with the banking
sector also evincing keen interest especially during the year
2002-03. In the year 2002-03, the banking sector was reported to
have crossed Rs.30,000 Crore mark in housing finance disbursal
whereas the housing finance companies also came close to disburse
Rs.18,000 Crore in the same year. According to the data available
with National Housing Bank total housing finance disbursement had
increased to Rs.72,424 Crore in 2004-05 from Rs.54,326.90 Crore in
2003-04 recording a growth of 33.3%. The volumes of loan sanction
and disbursement by Housing Development and Finance Company Ltd. (HDFC),
the largest housing finance institution in the country, of Rs.19,715
Crore and Rs.16,207 Crore respectively have grown by 30% and 28%
respectively in 2004-05. The affordability has increased due to tax
reduction, low interest rates and steady real estate prices and
innovative schemes, besides increase in income level. There has been
a distinct shift in the age profile of borrowers from late 30s and
early 40s a few years back to late 20s and early 30s at present. The
two policy areas of the financial sector, viz. monetary & credit
policy and fiscal policy are well disposed towards housing.
Rationalisation of stamp duty across the states and reforms in the
registration regime will generate further positive sentiments in the
lending as well as the construction industry. Reduction in existing
stamp duty and registration charges on mortgaged securitised papers
across all the states will pave the way for further increased flow
of fund into the Housing finance sector. (Source: NHB Annual Report
and other related reports)
The mortgage to GDP ratio (ratio of outstanding home loan to GDP) in
India is low as compared to developed countries where it ranges from
25% to 60%. The mortgage to GDP ratio stood at abysmal 2.5% in India
in 2001 when compared to 57% in UK, 54% in USA, 40% in EU, 7% in
China and 14% in Thailand, (Source: FICCI Survey). The said
statistics indicate tremendous potential in the Housing sector. |
