India Housing Finance Sector Report
Housing is a primary necessity in every economy and is a basic indicator of growth and social well-being. Development of housing is not just important to economic growth but is also one of the tools for economic development considering the accelerator impact it has on various industries including construction and infrastructure sector; it generates demand for supporting industries and leads to creation of job opportunities. Development of housing in a country is a sign of economic welfare.
For any emerging economy, development of the housing sector has its own challenges. The biggest of these challenges is access to finance. While investment in real estate is an easy candidate for borrowing, real estate lending is more opportunity-based. In India, access to finance for housing needs is largely concentric and focused at higher income groups, as that is the sector where there are formal evidences of income such as salary slips or income-tax returns. Since lenders tend to lend to sectors where lending is the easiest, the lower segments of the population pyramid will remain unserved or underserved, if the system was left entirely to itself. Therefore, there is a need, in every financial system, to enable access to finance by lower segments of the population pyramid.
While the upper middle-income segment is well-served by banks and mortgage lenders, the lower middle income segment has low or no access to banks for mortgage finance; creating a huge demand in this segment and lack of access of finance. The fact that the upper segments of the pyramid are well-served is evident from the highly competitive mortgage lending rates prevailing for the sector. There is also a much longer way to travel in terms of ensuring the availability of housing finance to low income to middle income groups.
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