Note ban hit high-end housing but low-cost homes gain: National Housing Bank chief
NHB managing director and CEO Sriram Kalyanaraman said the government’s decision to include the middle-income group category in the flagship Pradhan Mantri Awas Yojana would change the market dynamics.india Updated: Jun 04, 2017 23:22 IST
The government’s demonetisation drive in November last year slowed India’s fast-growing real estate sector, hurting high-end properties but favourable policy decisions helped low-cost homes do brisk business.
Initial trends for the first quarter of 2017 shows a robust growth in the business for houses below Rs 10 lakh. This trend is likely to reflect in the National Housing Bank’s Residex, which tracks home prices, when it is announced in a month.
“Initial trends show loans below Rs 10 lakh has increased. It used to be 30%. It now moved to 36%. We think it is because of the Pradhan Mantri Awas Yojana,” said Sriram Kalyanaraman, the NHB managing director and CEO.
“The focus has shifted to the lower end of the spectrum.”
A subsidiary of the Reserve Bank of India, the NHB regulates housing finance companies such as HDFC and LIC Housing Finance.
The housing sector grew at a compounded rate of 18% to 19% after the government scrapped two high-value banknotes, which accounted for 86% of the cash in circulation.
Kalyanaraman said this year’s expected growth is between 14% and 15%. “The problem is because there is a slowdown at the higher end…”
Analysts warned that India’s real estate, which is the second largest employer after agriculture and estimated to grow at an average 30% over the next decade, might face the affects of decreased cash flow after the demonetisation exercise.
Cash deals in real estate crimped after the government capped the transaction limit at Rs 2 lakh, making it difficult to buy high-end properties.
But the government said demonetisation helped lower home prices and benefitted the middle class.
According to Kalyanaraman, the government’s decision to include the middle-income group category in the flagship Pradhan Mantri Awas Yojana (PMAY), or housing-for-all scheme, would change the market dynamics.
“For the first time any government has said here is the middle class, I am recognising them as potential customers … demand from MIG is going to be much more than EWS and LIG,” he said.
Prime Minister Narendra Modi announced last December two components of credit-linked subsidy within the scheme.
People earning up to Rs 12 lakh a year can get a 4% interest subsidy on a loan of Rs 9 lakh. Those with an income of up to Rs 18 lakh will get a 3% subsidy on a loan of Rs 12 lakh.
Before that, the PMAY was for economically-weaker sections and the low-income groups earning Rs 6 lakh or less annually.
Asia’s third largest economy registered an economic growth slump — from 8.2% a year ago to 6.1% in the quarter ending March. Latest government data show the construction sector grew at 3.7% in the fourth quarter till March. The slowdown is attributed is to the November recall of 500- and 1,000-rupee notes.
But Kalyanaraman is optimistic that the demonetisation drive will benefit the housing industry in the long run. “First, we honestly believe house prices are coming down and it has come down.”
The salaried individual will gain from the transparency in accounting, documentation and payment in property deals that the new real estate regulatory authority act guarantees, he said.