Attributing the housing boom in India to easy availability of loans, newly-appointed Union Minister of Housing and Urban Poverty Alleviation Ajay Maken today said that the housing bubble could burst in the absence of proper planning.
As per the latest figure, he said, the number of vacant houses in the country were rapidly rising and already accounted for 11 per cent of the total housing units in developed areas where middle and upper middle class people live. This is like a bubble which can burst any time.
"We have a situation where on one hand we have 11 per cent vacant houses and on the other hand we have shortage of 18.5 million houses. Vacant houses are a bubble that can burst at any time," Maken said.
"Quality planning is of course one of the reasons, tenancy law the other. But I think, one of the more important reasons is perhaps the easy loans which are available for the middle and upper middle class families which are not available for the poor people," he said.
As per the 2001 census, 3.38 million houses were in Delhi, he said while launching 'Credit Risk Guarantee Fund Scheme for Low Income Housing (CRGFSLIH)'.
"Now again next figure is very interesting of this 3.38 million houses, 2.31 million houses were only used for residential purposes, which means one million houses are not used for residential purposes," he said.
"Out of this 0.38 million houses are totally vacant and this also includes 50 per cent of slums and unauthorised colony houses," he said, adding, "so, if you take only developed houses, it means 20 per cent of developed houses are vacant as per the 2001 census when the housing loan boom did not start."
However, the newly elevated Minister said providing loans to the economic weaker section (EWS) or the low income groups (LIG) could prevent from such a bubble burst to happen.
"So when we are talking about CRGF (Credit Risk Guarantee Fund) it is not only the credit risk we are taking care of but also you are taking care of the bubble burst risk which will never in this segment of economically weaker section.
Because anyone taking a loan for LIG or EWS flat, he is going to use it for himself. He is going to stay over there, he would not use it for speculative purposes as the other might do," he said.
"Through the scheme we have launched today, we intend to provide credit risk guarantee to lending institutions against their housing loans upto Rs 5 lakh for new borrowers in the EWS/LIG categories by creating a trust of Rs 1,000 crore," he said.
Maken said, "We have told the banking sector as well that these loans are more secure because firstly we are giving a credit security of Rs 1,000 crore and secondly there are no chances of bubble burst through such credits given".
Under the CRGFSLIH scheme, the borrowers from EWS/LIG categories could take up housing loans upto Rs 5 lakh without requiring any collateral security or third party guarantee.
The extent of guarantee cover provided under the scheme would be 90 per cent of amount in default in respect of loan amount up to Rs 2 lakh and 85 per cent of the amount in default for housing loan above Rs 2 lakh to 5 lakh.
The scheme aims at facilitating flow of credit to the low income households in the EWS/LIG category from the formal financial sector, Maken said.
In an effort to strike balance, Maken added that there are plans to modify the definition of the monthly earning of the LIG so that the concerns of banks will also be met.
Maken said that the ministry's long term goal was to provide property rights to slum dwellers and today's launch was a big step towards it.
"This Rs 1,000 crore in the credit risk guarantee fund trust will help in mobilising around Rs 50,000 crores of money to be disbursed for the poor people to buy their own homes," he said.
To mark the launch of the operations of the scheme, three major lending agencies in the retail housing market – State Bank of India, Central Bank of India and Housing Development Finance Corporation Ltd (HDFC) -- entered into agreement with the Credit Guarantee Trust, which will be managed by the National Housing Bank (NHB).
Source: Financial Express
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