Financing Institutions Need to Adopt a More Flexible Approach and a More
Positive Orientation in Serving the Housing Needs of Low Income Segments: Kumari Selja
The Housing & Urban Poverty Alleviation Minister Kumari Selja has said that the financing institutions will need to adopt a more flexible approach and a more positive orientation in serving the housing needs of low income segments. Speaking at the NHB-APUHF-APMCHUD International conference on Growth with Stability in Affordable Housing Markets here today she said, they should develop the requisite skills to mobilise domestic savings through innovative methods and devise schemes to lend at affordable rates.
The Minister said, in the Indian context, there has been steady growth in the Housing Finance Companies (HFCs) who are serving as dedicated outlets for the housing credit delivery. With the commitment of the Government towards the financial, social and economic upliftment and inclusion of the social and economically backward section, it is an appropriate time for the Banking sector to come forward in a big way to cater to their housing requirements by devising suitable appraisal and processing models.
She said, Government of India has extended a range of monetary and fiscal incentives to promote lending and investment in affordable housing. These include income tax benefits for the borrowers, lenders, investors, savers and construction agencies. The state governments have also come out with supportive housing policies, lower transaction cost and incentives to the developers.
Here is the text of the Minister’s speech:
“It gives me great pleasure to be present at this august gathering of experts and representatives of national and international institutions working for housing and human settlements in the Asia Pacific region. The theme of the Conference `Growth with Stability in the Affordable Housing Markets` is extremely relevant to the current context and depicts various dimensions of housing and housing finance. I am pleased to note that the National Housing Bank and the Asia-Pacific Union for Housing Finance (APUHF) and the Asia-Pacific Ministerial Conference on Housing and Urban Development (APMCHUD) are jointly organizing this conference. I am sure that these knowledge sharing platforms which are promoting coalition and coordination among the Asia-Pacific countries in the field of housing and housing finance, will consolidate and evolve rapidly in the best interest of all the countries.
The Asia Pacific region is characterized by the dynamics of growth, rapid urbanisation, and varying levels of development. Growing urbanisation in this region is coupled with proliferation of informal habitat with inadequate basic services. My Ministry worked with the UN-Habitat to establish a platform in this region for interaction at the Ministerial level and consequently Asia-Pacific Ministerial Conference on Housing and Urban Development (APMCHUD) was created in 2006. APMCHUD has been promoting close collaboration within the Asia-Pacific countries to jointly address the major challenges of Sustainable Urban Development including affordable housing for improving the quality of life of the underprivileged within the region.
With globalization and economic liberalization, being pursued by most of the countries in the Asia Pacific region, there is greater interdependence and integration among countries and economies. Opening up of the economies has resulted in flow of finances and investments across countries. In this inter-dependent world with inter-connected financial markets, it is important for each country to sustain investor confidence and also expand opportunities to attract new investments. I am happy to note that the subject matter of the deliberations is focused both on growth and stability in the Affordable Housing Markets, the two factors important for sustainability. The collateral global consequences of the sub-prime crisis need no elaboration. I am sure that the experts and professionals working in the field of financing and regulating housing development in their respective countries realise the importance of getting the policy right, particularly as most countries in this region are emerging economies.
Housing throughout the world has been recognized as one of the engines of economic growth because of its forward and backward linkage with other ancillary industries. Housing, in its most basic sense, provides social and economic security to the individual and at the macro level, adds to the economic growth. Recognizing this, the housing sector has been accorded importance by the governments across the countries. The major challenge today is to provide affordable housing to the masses. Many countries within the Asia-Pacific region face similar problems and issues with regard to the affordable housing.
The subject of affordable housing is the cornerstone of the Government of India`s National Urban Housing and Habitat Policy, 2007. Most of the emerging economies face this challenge which is critically linked to availability of financial resources, the depth and reach of the financial market and the institutional infrastructure for credit flow in the sector. India faces an estimated housing deficit of about 26 million, predominantly in the low income segments. This is an overwhelming number in itself. The proliferation of slums and informal settlements further add to the challenge. The role of the banks and the specialised mortgage lenders in various countries and their experience in addressing these problems could provide useful lessons for policy makers in both financial markets as well as the housing sector.
There has been consistent growth and expansion in the retail housing loan market in recent years. But this growth has been uneven, and large segments of the population continue to be outside the formal financial system. There is a definite need at this point in time to reorient our approach and develop programmes for reaching out to these segments. There must be a range of products to serve the needs of the different segments of the market.
The financing institutions will need to adopt a more flexible approach and a more positive orientation in serving the housing needs of low income segments. They should develop the requisite skills to mobilise domestic savings through innovative methods and devise schemes to lend at affordable rates. We should also explore solutions outside the fiscal support framework which we all collectively must strive to search and explore. I am sure that the Conference will deliberate on these issues and come out with valuable recommendations for the countries in Asia Pacific region.
In the Indian context, there has been steady growth in the Housing Finance Companies (HFCs) who are serving as dedicated outlets for the housing credit delivery. With the commitment of the Government towards the financial, social and economic upliftment and inclusion of the social and economically backward section, it is an appropriate time for the Banking sector to come forward in a big way to cater to their housing requirements by devising suitable appraisal and processing models.
Government of India has extended a range of monetary and fiscal incentives to promote lending and investment in affordable housing. These include income tax benefits for the borrowers, lenders, investors, savers and construction agencies. The state governments have also come out with supportive housing policies, lower transaction cost and incentives to the developers.
Along with incentives for encouraging the private sector in housing, Central as well as State governments also directly intervene in tackling the problems of housing of the low income groups. The most important programme initiated by the Central Government in recent years is the Jawaharlal Nehru National Urban Renewal Mission (JnNURM). It was launched in December 2005. It is a reform-driven initiative on a mission mode that provides for integrated development of urban infrastructure, housing and basic services. The Central government also launched the Interest Subsidy for Housing the Urban Poor (ISHUP) in 2009 to meet the credit requirements of the Lower Income Groups population living outside slums.
Learning from the experience of implementation of JnNURM, the Central Government has launched a new scheme Rajiv Awas Yojana or Rajiv Housing Scheme, named after our late beloved Prime Minister, in 2011. The government has unveiled a bold vision of slum free India through this scheme. The scheme is designed on the premise that providing property rights to the slum dwellers over the land under their informal settlements would unlock the trapped value of land and catalyze flow of finances to them.
The scheme also seeks to identify the failures of our systems and policies which have given rise to slums and take corrective action to redress them. In particular, the scheme mandates reforms in rent laws, land conversion, land development and land use policies, and simplification of building approval processes for housing development. The scheme also makes it compulsory for the earmarking of 20 to 25% of the developed housing land for EWS and LIG housing with appropriate incentives to the developers. Recognising the importance of a ‘push’ for credit to flow to the urban poor, the scheme proposes a Credit Risk Guarantee Fund. This fund would stand guarantee to the lending agencies for small housing loans to the EWS and LIG groups. This would enhance the credit worthiness of the lower income groups.
Various state governments have also made efforts to provide housing to the urban low income groups. Here, I would like to mention the INDIRAMMA Housing Programme of Andhra Pradesh Government. A few state governments have already created a legal framework for providing property rights to the slum dwellers on the government lands. The state of Madhya Pradesh has been a pioneer in this regard.
These initiatives have resulted in an appreciable growth in the affordable housing stock in the country as well as improving the quality of life of the slum dwellers and urban poor. There has been a net addition of about 20 million dwelling units in urban areas, rise in ownership housing from 63% to 67% and further reduction in overcrowding in the decade of 1991-2001. The impact of the initiatives for direct interventions for the poor in the last decade by central and state governments would be reflected in the latest census data which is expected to be available soon.
However, these achievements are inadequate when we look at the magnitude of the problem. Apart from direct interventions by government, we also need to pay attention to the development of the debt market for housing, encouragement of Public Private Partnerships; rental housing finance and promotion of community led housing finance and housing construction initiatives. The livelihood activities need to be strengthened in order to augment incomes and also to fulfil basic housing needs and access to the services. Micro-finance or credit to initiate such activities and strengthening institutions and regulatory framework to manage such activities are being actively pursued in our country and I know that we have a lot to learn from the other countries participating in this conference. Projects and programmes with strong partnership arrangements between communities, local agencies and private sector are of great interest to us.
There are good lessons to be exchanged among the countries in this region. Examples of successful schemes and programmes combined with the experience of sound and sustainable financing institutions have resulted in good market practices. The market oriented Government Housing Bank of Thailand, also represented in this Conference, combined with the subsidy-supported Community Organization Development Institute (CODI) has proved to be a good combination to work for the government programme in Thailand. We have examples of Urban Poor Programmes through Community Mortgage Schemes being implemented in Philippines which also represents a combination of mortgage financing and subsidy financing. The central banks in various countries including Mongolia, Brazil, Thailand, Malaysia, Bangladesh, Pakistan, and India have also played a very supportive role in developing the mortgage market, both primary and secondary mortgage.
All these country experiences show that the solution neither entirely lies with the government nor with the market, but somewhere in between the two. Therefore, there is need for partnership amongst all stakeholders-governments at the central, state and city level, private sector construction agencies, banks and financial institutions and non-governmental organisations representing the large section of the informal market. Looking at the range of the subject matter for this conference, I am sure all these issues and many others which I may not have mentioned, will be deliberated upon by the experts and eminent speakers from various countries.
I would also like to take this opportunity to highlight the importance of city planning and regulatory frameworks, which, if structured innovatively can effectively address the issue of affordable housing. We need to adopt innovative planning and management approaches proactively to address the issues of housing, civic services and urban poverty.
I wish the Conference all success in their deliberations, and I am confident that the suggestions and recommendations that emerge from the discussions will play an important role in shaping the policy and implementation strategies with regard to development of affordable housing in South Asia and Asia Pacific countries.”
Positive Orientation in Serving the Housing Needs of Low Income Segments: Kumari Selja
The Housing & Urban Poverty Alleviation Minister Kumari Selja has said that the financing institutions will need to adopt a more flexible approach and a more positive orientation in serving the housing needs of low income segments. Speaking at the NHB-APUHF-APMCHUD International conference on Growth with Stability in Affordable Housing Markets here today she said, they should develop the requisite skills to mobilise domestic savings through innovative methods and devise schemes to lend at affordable rates.
The Minister said, in the Indian context, there has been steady growth in the Housing Finance Companies (HFCs) who are serving as dedicated outlets for the housing credit delivery. With the commitment of the Government towards the financial, social and economic upliftment and inclusion of the social and economically backward section, it is an appropriate time for the Banking sector to come forward in a big way to cater to their housing requirements by devising suitable appraisal and processing models.
She said, Government of India has extended a range of monetary and fiscal incentives to promote lending and investment in affordable housing. These include income tax benefits for the borrowers, lenders, investors, savers and construction agencies. The state governments have also come out with supportive housing policies, lower transaction cost and incentives to the developers.
Here is the text of the Minister’s speech:
“It gives me great pleasure to be present at this august gathering of experts and representatives of national and international institutions working for housing and human settlements in the Asia Pacific region. The theme of the Conference `Growth with Stability in the Affordable Housing Markets` is extremely relevant to the current context and depicts various dimensions of housing and housing finance. I am pleased to note that the National Housing Bank and the Asia-Pacific Union for Housing Finance (APUHF) and the Asia-Pacific Ministerial Conference on Housing and Urban Development (APMCHUD) are jointly organizing this conference. I am sure that these knowledge sharing platforms which are promoting coalition and coordination among the Asia-Pacific countries in the field of housing and housing finance, will consolidate and evolve rapidly in the best interest of all the countries.
The Asia Pacific region is characterized by the dynamics of growth, rapid urbanisation, and varying levels of development. Growing urbanisation in this region is coupled with proliferation of informal habitat with inadequate basic services. My Ministry worked with the UN-Habitat to establish a platform in this region for interaction at the Ministerial level and consequently Asia-Pacific Ministerial Conference on Housing and Urban Development (APMCHUD) was created in 2006. APMCHUD has been promoting close collaboration within the Asia-Pacific countries to jointly address the major challenges of Sustainable Urban Development including affordable housing for improving the quality of life of the underprivileged within the region.
With globalization and economic liberalization, being pursued by most of the countries in the Asia Pacific region, there is greater interdependence and integration among countries and economies. Opening up of the economies has resulted in flow of finances and investments across countries. In this inter-dependent world with inter-connected financial markets, it is important for each country to sustain investor confidence and also expand opportunities to attract new investments. I am happy to note that the subject matter of the deliberations is focused both on growth and stability in the Affordable Housing Markets, the two factors important for sustainability. The collateral global consequences of the sub-prime crisis need no elaboration. I am sure that the experts and professionals working in the field of financing and regulating housing development in their respective countries realise the importance of getting the policy right, particularly as most countries in this region are emerging economies.
Housing throughout the world has been recognized as one of the engines of economic growth because of its forward and backward linkage with other ancillary industries. Housing, in its most basic sense, provides social and economic security to the individual and at the macro level, adds to the economic growth. Recognizing this, the housing sector has been accorded importance by the governments across the countries. The major challenge today is to provide affordable housing to the masses. Many countries within the Asia-Pacific region face similar problems and issues with regard to the affordable housing.
The subject of affordable housing is the cornerstone of the Government of India`s National Urban Housing and Habitat Policy, 2007. Most of the emerging economies face this challenge which is critically linked to availability of financial resources, the depth and reach of the financial market and the institutional infrastructure for credit flow in the sector. India faces an estimated housing deficit of about 26 million, predominantly in the low income segments. This is an overwhelming number in itself. The proliferation of slums and informal settlements further add to the challenge. The role of the banks and the specialised mortgage lenders in various countries and their experience in addressing these problems could provide useful lessons for policy makers in both financial markets as well as the housing sector.
There has been consistent growth and expansion in the retail housing loan market in recent years. But this growth has been uneven, and large segments of the population continue to be outside the formal financial system. There is a definite need at this point in time to reorient our approach and develop programmes for reaching out to these segments. There must be a range of products to serve the needs of the different segments of the market.
The financing institutions will need to adopt a more flexible approach and a more positive orientation in serving the housing needs of low income segments. They should develop the requisite skills to mobilise domestic savings through innovative methods and devise schemes to lend at affordable rates. We should also explore solutions outside the fiscal support framework which we all collectively must strive to search and explore. I am sure that the Conference will deliberate on these issues and come out with valuable recommendations for the countries in Asia Pacific region.
In the Indian context, there has been steady growth in the Housing Finance Companies (HFCs) who are serving as dedicated outlets for the housing credit delivery. With the commitment of the Government towards the financial, social and economic upliftment and inclusion of the social and economically backward section, it is an appropriate time for the Banking sector to come forward in a big way to cater to their housing requirements by devising suitable appraisal and processing models.
Government of India has extended a range of monetary and fiscal incentives to promote lending and investment in affordable housing. These include income tax benefits for the borrowers, lenders, investors, savers and construction agencies. The state governments have also come out with supportive housing policies, lower transaction cost and incentives to the developers.
Along with incentives for encouraging the private sector in housing, Central as well as State governments also directly intervene in tackling the problems of housing of the low income groups. The most important programme initiated by the Central Government in recent years is the Jawaharlal Nehru National Urban Renewal Mission (JnNURM). It was launched in December 2005. It is a reform-driven initiative on a mission mode that provides for integrated development of urban infrastructure, housing and basic services. The Central government also launched the Interest Subsidy for Housing the Urban Poor (ISHUP) in 2009 to meet the credit requirements of the Lower Income Groups population living outside slums.
Learning from the experience of implementation of JnNURM, the Central Government has launched a new scheme Rajiv Awas Yojana or Rajiv Housing Scheme, named after our late beloved Prime Minister, in 2011. The government has unveiled a bold vision of slum free India through this scheme. The scheme is designed on the premise that providing property rights to the slum dwellers over the land under their informal settlements would unlock the trapped value of land and catalyze flow of finances to them.
The scheme also seeks to identify the failures of our systems and policies which have given rise to slums and take corrective action to redress them. In particular, the scheme mandates reforms in rent laws, land conversion, land development and land use policies, and simplification of building approval processes for housing development. The scheme also makes it compulsory for the earmarking of 20 to 25% of the developed housing land for EWS and LIG housing with appropriate incentives to the developers. Recognising the importance of a ‘push’ for credit to flow to the urban poor, the scheme proposes a Credit Risk Guarantee Fund. This fund would stand guarantee to the lending agencies for small housing loans to the EWS and LIG groups. This would enhance the credit worthiness of the lower income groups.
Various state governments have also made efforts to provide housing to the urban low income groups. Here, I would like to mention the INDIRAMMA Housing Programme of Andhra Pradesh Government. A few state governments have already created a legal framework for providing property rights to the slum dwellers on the government lands. The state of Madhya Pradesh has been a pioneer in this regard.
These initiatives have resulted in an appreciable growth in the affordable housing stock in the country as well as improving the quality of life of the slum dwellers and urban poor. There has been a net addition of about 20 million dwelling units in urban areas, rise in ownership housing from 63% to 67% and further reduction in overcrowding in the decade of 1991-2001. The impact of the initiatives for direct interventions for the poor in the last decade by central and state governments would be reflected in the latest census data which is expected to be available soon.
However, these achievements are inadequate when we look at the magnitude of the problem. Apart from direct interventions by government, we also need to pay attention to the development of the debt market for housing, encouragement of Public Private Partnerships; rental housing finance and promotion of community led housing finance and housing construction initiatives. The livelihood activities need to be strengthened in order to augment incomes and also to fulfil basic housing needs and access to the services. Micro-finance or credit to initiate such activities and strengthening institutions and regulatory framework to manage such activities are being actively pursued in our country and I know that we have a lot to learn from the other countries participating in this conference. Projects and programmes with strong partnership arrangements between communities, local agencies and private sector are of great interest to us.
There are good lessons to be exchanged among the countries in this region. Examples of successful schemes and programmes combined with the experience of sound and sustainable financing institutions have resulted in good market practices. The market oriented Government Housing Bank of Thailand, also represented in this Conference, combined with the subsidy-supported Community Organization Development Institute (CODI) has proved to be a good combination to work for the government programme in Thailand. We have examples of Urban Poor Programmes through Community Mortgage Schemes being implemented in Philippines which also represents a combination of mortgage financing and subsidy financing. The central banks in various countries including Mongolia, Brazil, Thailand, Malaysia, Bangladesh, Pakistan, and India have also played a very supportive role in developing the mortgage market, both primary and secondary mortgage.
All these country experiences show that the solution neither entirely lies with the government nor with the market, but somewhere in between the two. Therefore, there is need for partnership amongst all stakeholders-governments at the central, state and city level, private sector construction agencies, banks and financial institutions and non-governmental organisations representing the large section of the informal market. Looking at the range of the subject matter for this conference, I am sure all these issues and many others which I may not have mentioned, will be deliberated upon by the experts and eminent speakers from various countries.
I would also like to take this opportunity to highlight the importance of city planning and regulatory frameworks, which, if structured innovatively can effectively address the issue of affordable housing. We need to adopt innovative planning and management approaches proactively to address the issues of housing, civic services and urban poverty.
I wish the Conference all success in their deliberations, and I am confident that the suggestions and recommendations that emerge from the discussions will play an important role in shaping the policy and implementation strategies with regard to development of affordable housing in South Asia and Asia Pacific countries.”
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