Finance firms bring home for everyone
Now, customers have a wider option to choose financial partner
Nov 29, 2013
Source : The Economic Times


DELHI: The housing finance industry has grown significantly both in terms of size and numbers in the last 20 years.

From only a few housing finance companies such as Housing Development Finance Corporation (HDFC) and Dewan Housing Finance Ltd (DHFL), the industry has grown to accommodate a host of new dedicated housing finance companies and non-banking financial institutions.

With the proliferation of HFCs and banks, customers now have a wider option to choose their financial partner compared with 20 years ago.

Even the rate of interest has fallen from the highs of 14-16 per cent about 20 years ago to about 10 per cent now. Also, about 20 years ago, banks were not too keen on financing buying homes.

This changed during the turn of the century as more banks wanted to get a pie of the relatively safe option of financing a home.

Affordable housing

However, one must not mistake the growth in the number of HFCs with the access to funds for the affordable housing segment.

While India's rising middle-class and builders found easier access to cleaner finance, the bottom 40-50 per cent of the population has not been so lucky.

This is simply because there are not enough affordable houses being built. While many houses were built by the Government in the affordable segment, demand has kept outstripping the supply. One way to solve this gap could have been by involving the private sector, but due to lack of incentives and desire for higher profits the private sector has kept away from the affordable housing segment.

Trends in the industry show that in the last 20 years, there has been little improvement in the stock of affordable housing in the country. The addressable gap in this segment has grown to 19 million units in 2013 from about 15 million units two decades ago.

While housing finance companies have grown in number, people still find it difficult to get finance for their homes because of the insistence on mandatory 20 per cent equity requirement from buyers. For instance, for a Rs 50 lakh house, buyers will have to cough up at least Rs 10 lakh initially. This is not a small amount for the average middle-class family, and more often than not limits buying opportunities.

HDFC, which started doing business in 1977, has till now cumulatively financed about 45 lakh units. As prices are rising, the HFCs find the size of a loan going up every year. Moreover, the demand for home loans is immense (even in a slowing economy) given the acute shortage of housing.

For instance, HDFC’s loan disbursements have grown by about four times in the last seven years. From 1994 to 2006, the loan disbursements grew steadily from Rs 1,212 crore to Rs 20,679 crore. Its loan outstanding grew to Rs 1.70 lakh crore in March 2013 from just Rs 3,748 crore in March 1995. This trend has been observed among other HFCs and some major banks too.

According to Keki Mistry, Chief Executive Officer of HDFC, “The growth in the past 15-20 years has been massive and this emanates from the growing population and requirement of housing. Though the rates of buying a house have increased, so has the cost of labour, raw material and land prices.”

Over the last seven years house prices have increased significantly, much beyond the rate of increase in the cost of raw materials and other input costs. This has left the average aspirational Indian more disillusioned.

Mistry defended this saying, the income levels too have risen, which has increased purchasing power. Also, it is not correct to compare Mumbai and other metros to tier-I and II cities. The potential and purchasing power exists in those cities, he argued.

Another major trend that has been observed is that much of the housing in major cities such as Pune, Mumbai and Delhi are cornered by investors, who collectively come together and invest in real estate. This has led to a sizeable chunk of housing stock being purchased but remaining unoccupied.


One positive development during the last 20 years was the establishment of four credit bureaus. All of them were set up after 2000. This has resulted in a more thorough, although not fool proof, appraisal of credit requirement of a borrower. In most cases, where the HFCs lend to builders and developers, the information obtained from credit bureaus have come in handy.

Another positive development was the establishment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) — 2002, which allowed HFCs to go after defaulters. Till then there were no foreclosure norms in the country which meant long drawn court battles between the HFCs and the borrowers.

With government help in providing the benefits to middle-income households with better interest rates and financing facilities, HFCs may see a surge in demand for housing loans, he added.

Latest Realty News

Rapid urbanisation creating new spaces in Delhi-NCR market
Nov 28, 2013
DELHI: What makes the Delhi-NCR real estate market stand out compared with many other corridors in the country?
Infrastructure upgrades get priority in Greater Noida
Nov 28, 2013
DELHI: After a long and undisputed success of Noida, Indirapuram and Raj Nagar Extention, the government authorities have their hands and eyes set on Greater Noida. Already known as the industrial and educational hub of NCR, Greater Noida has been witnessing real estate development for the past few years.
Onion tears in the Indian residential sector
Nov 28, 2013
DELHI: The whole country was recently abuzz when the price of onions (one of the most essential staples of the Indian diet) rose above the price limit of Rs 100 per kg (that’s nearly USD 0.75 per pound) in the country’s capital and surrounding areas. The reasons for this were a crop affected by unseasonal rains and hoarding by suppliers and a few large farmers to create an artificial supply shortfall. This story finds a parallel in the country’s residential sector.
Indian real estate sector: Waiting for a change
Nov 28, 2013
DELHI: Overall the real estate industry is grappling with a paradox. There is a distinct gap in the supply – demand scenario and costs involved. Builders have numerous concerns to deal with even before they start construction. Some of which include the amount of time and costs involved in obtaining the plethora of approvals and licences required, the incessant wait for bureaucratic processes, being stuck with non-productive land for which they have to incur expenses. All this coupled with the co
LandCraft Group launches 3 New Towers at River Heights
Nov 28, 2013
GHAZIABAD: River Heights is the maiden project of Raj Nagar Extension launched in 2008 by Landcraft Developers Pvt. Ltd. The phase I comprising of 700 units have already been delivered and 650 plus families are already residing at the site. After the success of Phase I, the company has launched the Three New Towers in Second Phase of the Project offering another 600 apartments of 1, 2 and 3 BHK. The sizes of the apartments are 718 to 1665 sqft. The Price range starts from 23 Lakhs goes upto 45
Yamuna Expressway: An Ideal place to invest
Nov 27, 2013
DELHI: Affordable property rates, upcoming infrastructure and prime location make Yamuna Expressway an ideal investment destination. This location advantage is a big boon for realty players. Some developers such as Jaypee, Supertech, Ajnara and Cosmic Group, have already launched their projects. These builders have targeted the Buddha International Circuit and have their projects within a radius of 5 km.
Neemrana – The next big real estate destination
Nov 27, 2013
DELHI: It has been proposed that Neemrana, Shahjahanpur and Bahrod be included as three sub-metropolitan cities in the National Capital Region (NCR). Surprised?
Over 150 million sq ft of new office space by 2017: CBRE
Nov 27, 2013
DELHI: The commercial office segment of India’s top cities is expected to see fresh supply addition of more than 150 million sq.ft by end-2017. According to CBRE Research, the next four to five years (including the concluding months of 2013) are slated to see the completion of a number of under construction and planned commercial office projects—almost comparable to the existing Grade A office space of India’s National Capital Region (NCR) and its financial capital put together.
Energy-efficient homes: NHB seeking €100 m from German bank
Nov 26, 2013
DELHI: National Housing Bank is in talks with German Government bank KFW for a second line of credit to support energy-efficient houses.
NH-24: An affluent residential destination
Nov 26, 2013
DELHI: National Highway 24, connecting Delhi to Moradabad, is one of the most frequented arterial passages of the city, and has become an affluent residential destination in Ghaziabad. A state-of-the-art infrastructure including the proposed widening of the highway from the present 4-lanes to 8-lanes is a veritable clarion call, exhorting and impelling interested buyers to this area.

Latest Realty News Of State

Realty Talk's