Builders Seek New Sources of Financing for Affordable Property in India

Affordable property in India may have received a new champion in the form of the CREDAI. The confederation of Real Estate Developers Association of India has stated that banks, as well as housing finance companies, should support builders in the country when such builders undertake the construction of affordable housing in India. The reason that the CREDAI has sought the help of banks and other lending institutions is that the CREDAI feels that affordable projects are a low margin business which requires cheap capital to earn to profit for builders.

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Interested in Building Affordable Homes

The government announced in the budget that affordable homes shall now be counted among infrastructure projects; meaning that builders in India would be able to take loans at lower rates if and when they decide to build affordable projects.

Views Recently Expressed

The president of the CREDAI’s NCR chapter has stated that due to the increase in interest in affordable housing and for builders to meet the target of affordable housing for all by 2022, builders shall require greater assistance and help from banks and other lending organisations to make it profitable to build and sell affordable houses. In other words, the CREDAI’s believes that due to low profitability margins attached to the sale of affordable housing, CREDAI requires special facilities from partners such as lenders and financing institutions to fund the construction of affordable real estate in India.

It has been remarked on Indian real estate websites that great attention today is focused on an affordable realestate in India. To make possible the dream of housing for all within 5 or 6 years will requires a mammoth construction of houses, firstly, however, building and selling affordable housing at a profit will only be given impetus when it is thought feasible by builders and developers.

The NCR Chair of the CREDAI Chapter has stated that developers will comply completely with the definition of what is an affordable property and what property does not fall in the affordable segment. Hence according to some property sites in India, builders will not classify mid-income or other higher end projects as affordable projects in an attempt to receive funds at rates that are more favourable such projects.

Conclusion

A white paper by a leading real estate consultancy has remarked that many propertiesin India may be built by capital from institutional investors. Financing of many properties in India shall shift from its current informal source to more a formal and transparent source.  

The Pressing Need for More Property Websites in India

The sheer number of property websites in India should be far larger than it is today. Real estate websites present today cover only a fraction of the properties or real estate in India that can be bought or sold. Just as large developed countries have thousands of banks (the US has over 10,000, India has less than 100 commercial banks), there is a need for much greater buying and selling of real estate in India and hence many more real estate websites are needed to serve a market that is semi formal or informal.

Understanding Indian Realty

A large number of middle class Indians who live in large cities own their own homes; the number of such estimates would be difficult to arrive at yet a balanced assessment would be that most middle class Indians own their own house in large urban centers. Additionally middle class Indians often also own property in their ancestral home; for instance property in India is still evolving and many household that are regarded as poor in cities are often wealthy landowners in their villages. Most of this rural or semi rural property is never listed and few online portals aggressively cater to those who are eager to buy or sell their ancestral home or agricultural land.

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Who Buys Ancestral Land

Currently many of those who dispose of their agricultural land sell it to local developers or to large developers if the property is near an expanding urban center. The need for real estate websites in India that cater to the buying and selling of such property is sorely needed. Most transactions of ancestral land are conducted locally yet this deprives the sellers from attaining a fair price or prevents a buyer from paying a fair price as well. Such deals are yet unregulated and deals are often brokered rapidly before one or the other party changes his or her mind.

Regularization of the Rural Market

The need to sell such property in India using real estate websites is crucial, as many Indians need to be brought under the formal economy. India, a country of over 1 billion has less than 100 banks whereas the USA with only four hundred million people has over ten thousand. Just as India has fewer banks it also has too few real estate websites and which, once they are operational will bring a protective shield over rural real estate transactions and make such deals part of the formal economy.