The chief executive officer of HDFC says low interest rates, stable property prices and general feel good factor will help boost demand for housing after recent announcements by the Prime Minister, in an interview.
How do you look at the announcements made by the PM on housing?
The prime minister’s announcements on housing are tremendously positive and will give an impetus to the `Housing for All by 2022′ scheme. This will increase formal credit flow to smaller towns for constructing new houses. It will also boost demand for low-cost housing across the country. We expect demand to pick up in tier-3 and tier-4 cities, where properties in these range are available.
The interest subvention scheme would reduce the EMI. Low-cost housing segment would definitely witness growth. And any boost that is given to the real estate sector effectively adds to the economic growth.
Will the demand for housing loans go up immediately?
In the past, when subvention schemes were announced, builders have constructed properties that qualify for this benefit. It will lead to increased construction activity in tier-3 and tier-4 cities. The more one creates low-cost housing, it helps boost GDP. It helps in generating employment. Any boost in the construction sector will add to GDP growth. Housing is a barometer for economic growth of a country.
Housing loans to GDP is at 9%. Will interest subvention lead to an increase in this number?
Housing loans to GDP is at 9%, while China is at 18% and most of the advanced economies are at 60-85%.There are many factors that will help improve this percentage. Almost 20 years ago, housing was unaffordable.
The government has done a lot through Budget announcements by giving tax sops to both homebuyers and developers (for affordable housing). I would expect similar boost and higher allocation in the coming Budget.
Will this alone help boost demand?
Low interest rates, stable property prices and general feel good factor are the perfect recipe for boosting demand for housing. The feel good factor will depend on job stability, which looks good at the moment. Also, rising disposable income and favourable demographics will definitely boost demand for housing in India.
Many new companies have come in expecting a higher growth in credit demand post the government’s push for Housing for All’.
Will this lead to higher credit pick up in housing loans?
Housing finance companies have grown by 15-18% in the last couple of years. This move could help the industry grow at a slightly higher rate. The growth will be more widespread. Affordable housing was growing at much lower pace. This will give an impetus to demand in that segment. We have always focused on tier-2 and tier-3 cities and also outskirts of metros large cities. We will continue to focus on these areas.