DSIJ Mindshare

Budget Expectation 2017: Housing Finance Sector

If there is any sector which is likely to hog maximum limelight in this upcoming Union Budget it has to be the ‘housing’ sector which is one of the prime focus of the Modi government, especially after the demonetisation move which led to drastic cut in interest rates.

‘Housing for All by 2022’ is one of the most ambitious projects of the current dispensation which aims to provide shelter to all Indians by 2022, which would entail massive infrastructure spending in the housing and construction sector.

This humongous task undertaken by the government needs to be carefully planned, both in terms of capital spending by government and at the same time inviting private participation into the sector.

As the focus shifts to the housing sector, one of the key allied sectors, i.e. sector closely associated with housing and construction is the finance sector, especially the housing finance companies.

The Modi government looks firm on its agenda when it comes to housing as a sector with recent moves post demonetisation be it interest subvention on housing loans, interest subsidy on loans upto Rs 2 lakh for households which are not covered under Pradhan Mantri Aawas Yojana and special focus on urban and rural poor by launching new housing schemes and rebates in loans for poor. All of this augurs well for the sector in coming times.

On the back of government’s relentless push to stimulate economic growth, especially in the housing sector, which also turns out to be one of the biggest employer and which is definitely in for exciting times ahead. The government has already started working on it with several steps being already undertaken.

There are several other steps which according to Harshil Mehta, CEO, DHFL if taken in due course of time can lead to unlocking the true potential of the sector. Some growth-oriented efforts would include:

1). Allocation of more funds under the Rural Housing Scheme with facility for onward lending – Rural Housing Finance has been successful in promoting rural housing to the targeted segment. Hence it is desirable that funding under this scheme continues with a larger corpus and allocation is permitted upfront for enabling onward lending instead of a refinance. This will enable housing finance companies to aggressively go into the market with a pre-defined strategy and minimise the risk of interest rate fluctuations. A mechanism could be put in place including a specific timeframe during which these funds need to be utilised.  
 
2). Increase in Indirect Priority Sector Lending limit - Currently, under the indirect priority sector lending norms, banks can lend to HFC’s for onward lending for home loans up to Rs 10 lakh only, whereas the capping is Rs 25 lakh for direct lending by banks. These limits may be revised upwards and capping for onward lending by HFC may also be brought at par with the securitisation/ assignment limits.
 
3). Under the CLSS scheme of Pradhan Mantri Awas Yojna, the subsidy is given on Rs 6 lakh of loan without any distinction of city categories, and therefore, there is no distinction in the cost of construction/ property prices or cost of living. It is suggested that the subsidy may be linked to city categories to benefit the target segment appropriately .
 
4) Taxation
 
5) The other aspect of benefit measures can take the form of incentives for digital payments, given the trend of incentivising cashless transactions. We are likely to expect a number of sops encouraging e-payments in the 2017 budget.”

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