The housing sector (CRE) for long has been a victim of step-motherly treatment. The cost of funding for the developer as well as the end buyer has been very high, which has resulted in the prevailing negative sentiment.

The RBI has accorded a risk weightage of 1.25 times the funding for a housing project and slapped a ceiling on exposure to CRE, which has increased cost of lending by bankers.

This has led to scarce funding of such projects. The RBI has told bankers that home loans to flat buyers shall not include taxes, and has imposed a ceiling for loans at 80 per cent — instead of the previous 90 per cent, of the total cost, including taxes. Effectively, buyers would have to contribute 30-45 per cent of the cost of the house before they can avail a loan.

The developer community has been fighting for infrastructure status to housing, to avail of easy funds at lower rates of interest. The bankers’ mindset towards housing will change, once this is done.

Housing is also expensive due to the high cost of funds. High rates of interest and the resultant high EMIs have put off prospective buyers. Lending rates have also been high for well over a year, with the RBI tightening money supply through increased repo rate and CRR.

Credit to commercial real estate (CRE) has gone down by more than 13 per cent and priority lending to housing by 1.29 per cent over the last fiscal. Total lending to CRE is less than 4 per cent of entire credit by banks, whereas the global standard is more than 20 per cent of total credit.

Now, lending rates have begun to come down with the reduction in repo rate. But one is not sure as to how long this situation will continue. We cannot subject home buyers to such uncertainty.

The country’s housing shortage, at 18.1 million houses, cannot be addressed with the prevailing policies. The introduction of reliefs under Sections 80IB and 80 IA of Income Tax Act in 1998 had given a big boost to the entire economy, as the direct tax benefits resulted in the growth of indirect tax revenues of the Centre and huge gains to the States through stamp duty and other taxes. Even municipal bodies earned well through octroi, premiums and cess. Besides, employment generation was phenomenal.

Real estate contributes as much as 5.5 per cent to the GDP, and together with the construction industry, the share goes up to 11 per cent. Even in China, which is more known as manufacturing hub, the contribution of real estate to its GDP is as high as 30 per cent. Once housing gets infrastructure status and easy funding, we can expect a massive chain reaction in terms of creation of employment. Over 400 industries depend on real estate and construction.

We can ensure double-digit GDP growth.

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