Centre working on new home loan scheme for informal sector workers: Official
Report titled ‘Affordable Housing in India: Demand-Supply Assessment and Financing Opportunity’ highlights a shortage of 31.2 million units by 2030
NEW DELHI: The Centre is working on a government-backed credit guarantee mechanism to provide affordable home loans from institutional sources to workers outside the formal ecosystem, a senior government official said on Wednesday.
“At present, cheaper home loans are limited to people with good business income or salaries. Even for people who can afford to pay, it takes two years to build a good credit history. So, we are working on a home loan product for people working in the informal sector, backed by a government guarantee,” Kuldeep Narayan, joint secretary at ministry of housing and urban affairs said on Wednesday.
Narayan was speaking at a conference organised by the Confederation of Indian Industry (CII) to mark the launch of a report titled ‘Affordable Housing in India: Demand-Supply Assessment and Financing Opportunity’.
The report by CII and real estate consultant Knight Frank said India was estimated to have a cumulative affordable housing demand of 31.2 million units by 2030, with a potential market size of ₹67 trillion.
It also highlighted a current shortfall of 10.1 million affordable housing units, underscoring a growing and urgent need.
The report said that interest rate hikes disproportionately affect affordable housing, based on an analysis of lending rate changes governed by the Reserve Bank of India.
“During the Covid-19 pandemic, when lending rates were low, the EMI/income ratio for the economically weaker section (EWS) was 43%. It has now surged to 62%. This increase is due to both interest rate hikes and rising prices. Notably, this ratio exceeds the 50% FOIR (fixed obligation to income ratio) limit set by the banking sector, restricting home loan borrowings for EWS buyers,” the report said.
The report also spoke about a decline in affordable housing sales despite rising demand. Between 2018 and 2024, the share of affordable homes (sub-5 million) dropped from 54% in 2018 to 26% in 2024 (until September) across the top eight cities.
“It is estimated that 22.2 million houses will be needed in urban centres by 2030, with a current shortage of 10.1 million units. Of this, 21.1 million will be in the affordable housing segment, with 45.8% of the demand coming from economically weaker sections,” the report added.