Housing Boards

While its been very encouraging to see private developers enter the urban low income housing space (defined by us as being flats of approx Rs 5-6 lakhs), and we certainly want to partner with these developers, there is no question that in terms of numbers, the state continues to be the largest developer. While housing boards and local development authorities have always built for the EWS / LIG segments, in recent years, due to the govt's inclusion focus and the availabiity of JNNURM finance (for 62 cities), there have been several urban housing programs, which completely eclipse the numbers from the private sector. For eg - the state of Andhra has plans to build over 170,000 homes, Rajasthan over 100,000, cities like Ahmedabad, Surat, Mumbai, Lucknow have plans in the tens of thousands. More importantly, the state is driven by social objectives and thus irrespective of economic swings, will remain focussed on this segment. Further, while there will be some leakages, the buyer will be from LIG segments (as against buyers from higher income segments, including investors, being attracted to the private projects meant for LIG segments). Thus, if MHFC has to make impact, it will probably have to come from tie ups with state agencies like MHADA / DDA, state housing boards, municipal corporations, etc who are building for the weaker sections and need to fill the last gap of buyer financing.

Budget

thoughts / quick summary on the budget impact on MHFC / affordable housing:

1. nothing in it for the private developers / financiers - no specific schemes / amendments to previous schemes

2. however, significant impact on govt schemes which directly and indirectly impact LIG / EWS housing:
(a) rural housing fund (run by the NHB) allocation to go up by Rs 2,000 cr - this is the refinance scheme which provides funds to HFCs at 8% - while all our loans would eventually qualify (since our suburban focus falls under rural), not sure how we will benefit as not sure what the availability of this resource will be after our qualification period (generally 2 years)
(b) JNNURM allocation to almost double to about Rs 12,800 cr - assuming this is 25% used for urban housing, this is about Rs 3200 cr - given that grant / subsidy for housing is normally capped at Rs 1.5 lakhs, I guess this can support about 200,000 homes - which is significant.
(c) Indira Aawas Yojana - this is aimed at rural housing - and allocation also increased (38%) to Rs 8800 cr - which is significant but not sure whether MHFC can access since mostly rural and very small ticket (Rs 25,000 loan size normally and house budget less than Rs 50,000 normally)

but the main announcement is the new scheme
(d) Rajiv Awas Yojana - for which details still awaited (and expected to come out on Aug 20) - which has recd funding of approx Rs 4000 cr and is aimed at urban low income housing - its expected to be on the lines of the JNNURM program - so a mix of grant (from Central Govt), land (from state govt) and loan (envisaged from the HFCs / banks which is where MHFC can play a role).

all in all, private developers might be disappointed by the budget, but for HFCs willing to partner with the states, there are possibiities