Housing Sector: Affordable homes, procedural delay major concerns

Huge financial investments are required to overcome the urban housing shortage, at 18.8 million units, of which 95.6 percent is in EWS/LIG segments


NEW DELHI, Feb 27: Widening demand-supply gap in the housing sector and solutions for financing affordable homes are major policy concerns, according to the Economic Survey 2014-15. The pre-budget survey also notes that procedural delay is another major constraint in this sector, which has been affected by the domestic and global slowdown. "The widening gap between demand and supply of housing units and affordable housing finance solutions is a major policy concern for India," the Economic Survey for 2014-15 tabled in Parliament today said. The document said that huge financial investment is required to overcome the urban housing shortage, which at present is 18.8 million units, of which 95.6 per cent is in economically weaker sections (EWS)/low income group (LIG) segments. "Institutional credit for housing investment is well below that in countries like China, Thailand, and Malaysia though growing at a CAGR of about 19 per cent per annum. Procedural delay is another major constraint in this sector," the survey said. The report mentioned that according to World Bank's 'Doing Business 2015' report, India ranked 184th (out of 189 economies) in terms of construction permits, requiring on an average 27 procedures to get permits as compared to an average of 14 in South Asia and 12 in OECD (Organization for Economic Cooperation and Development) countries. Stating that real estate and ownership of dwelling constituted 7.8 per cent of country's GDP in 2013-14, the survey said: "Both domestic and global slowdown affected this sector with growth decelerating from 7.6 per cent in 2012-13 to 6 per cent in 2013-14 and FDI in the real estate sector falling to USD 703 million in the period April-November 2014". It also mentioned that housing prices have increased over the years in many cities and towns as per the National Housing Bank's RESIDEX index of residential prices in India. "In 2014, out of 26 cities, 17 witnessed increase in prices over 2013 with the maximum increase observed in Chennai (17 per cent) followed by Ahmedabad (15 per cent), while seven cities saw decline, with the maximum fall witnessed in Meerut (-16 per cent) followed by Chandigarh (-8 per cent)," it said. Highlighting several steps taken by the government to boost the growth of the real estate sector, the survey said that FDI policy has been amended and also setting up of Real Estate Investment Trusts (REITs) has been announced. "In order to encourage savings, the deduction limit on housing loan interest for self-occupied property was also increased to Rs 2 lakh from the earlier Rs 1.5 lakh in Budget 2014-15," the survey said. To push development of affordable housing and achieve the target of housing for all by 2022, the Reserve Bank of India (RBI) relaxed norms for issue of long-term bonds by banks for financing affordable housing, the survey added.