Budget 2017: PM Modi’s housing-for-all vision likely to get a boost

The budget proposals are likely to follow up on Modi’s December 31 announcements of cheaper lending for poor and middle-class homebuyers with 4% subvention on loans up to Rs 9 lakh and 3% on those up to Rs 12 lakh.

Prime Minister Narendra Modi’s stated vision of housing for all is likely to get a push in the Union budget on Wednesday as the government looks to tap the real estate sector to boost a flagging economy.

Prime Minister Narendra Modi during an all-party meeting ahead of the budget session at Parliament House in New Delhi on Monday.(PTI)

Among measures under consideration is an interest subvention scheme whereby home loans could come at rates as cheap as 3-4% for salaried people with annual income less than Rs 10 lakh, three sources privy to the thinking within the government said independently. The cap on loans eligible for this could be in the range of Rs 25-30 lakh.

The budget proposals are likely to follow up on Modi’s December 31 announcements of cheaper lending for poor and middle-class homebuyers with 4% subvention on loans up to Rs 9 lakh and 3% on those up to Rs 12 lakh. For home renovation loans up to Rs 2 lakh in villages, banks would provide 3% subvention on the interest rate, Modi said.

To avoid harassment of genuine taxpayers, the income-tax department has proposed an online interaction to explain cash deposits post-demonetisation. The department wants data on cash deposits of above Rs 2 lakh uploaded on its website where taxpayers can log in with their PAN details and explain the transaction in a set format. The data fields would be reconciled with tax returns. The proposal is pending withe the election commission as the model code of conduct is in force.

“The government recognises the fact that the real estate sector is the second-largest employer. And the prime minister’s vision is to ensure affordable housing for all. In that way these are complementing each other, so the budget will have a lot of focus on affordable housing,” a senior government functionary said.

One of the sources cited above explained the rationale thus: “Investment in real estate will have a multiplier effect. There are 500 industries and trades directly and indirectly linked to the real estate sector. An internal assessment by the government has pegged a requirement of 20 million dwellings in Tier 1 cities by 2020 and 94% in the affordable housing category.”

But, it could prove easier said than done. “The government has to enable the buyer with cheaper loans. Also, on the supply side, the borrowing cost should come down. It is critical to give infrastructure industry status to real estate firms engaged in affordable housing to make the borrowing cheaper,” Getamber Anand, president, Confederation of Real Estate Developers’ Association of India (Credai), said.

Two sources who spoke to HT on the condition of anonymity said the government had taken public sector banks and the central bank into confidence to lend more to the sector.

Public sector banks have relatively low exposure to the real estate sector compared with foreign and private banks, an HT analysis of RBI data on loan disbursement shows. At the end of October last year, public sector banks’ exposure to the sector stood at 17.9% while foreign and private banks had it higher at 26.4% and 25.2%, respectively. Among bad loans, individual housing loans show the lowest rate of default at less than 10%, according to RBI sources.