The Economic Times | 29 November 2017
Apart from affecting the overall market sentiment, these government policies have forced people to adopt a ‘wait-and-watch’ policy
With the government lending a major policy push to its vision of ensuring 'Housing for All’ by bringing homes up to 150 sq m under the affordable housing scheme and private players rising to the occasion, the million-dollar question is will the government be able to meet its target by 2022?
An uptick in home financing options and increase in the purchasing power of people working in the private sector has undoubtedly given a fillip to residential sales. But demonetisation, RERA and GST have been a dampener.
Apart from affecting the overall market sentiment, these government policies have forced people to adopt a ‘wait-and-watch’ policy.
But there is another dimension to this debate. Will affordable housing create an artificial demand bubble?
Some experts warn that one must tread with utmost caution, looking into genuine supply and demand as an oversupply of housing and artificial demand will create a bubble which may not last very long. The US economic crisis of 2008, for example, also started with an ambitious dream by the then-president George Bush, of ensuring each American family has his own house. To realise this dream, the US government framed a policy of home loans backed by government assurance in case of loan default, which led to artificial demand. This created a bubble in the financial market which grew so much that when it burst, it affected almost the entire world.
“On a macro level, there is one fear that the 2008 economic crisis in the United States started from the housing scheme. All this was backed by subprime loans which led to an economic recession in US. If anything is happening naturally and takes its natural course, it is great, but if anything is artificially boosted it may lead to unsavoury consequences. The biggest concern for the government should be that it must not lead to an artificial bubble,” says Amit Chandra, Associate Director (Policy & Advisory), Centre for Civil Society.
Chandra further adds that the real estate market is one of the most distorted markets in India and lack of apt records makes it even messier. “If you look at the total number of court cases in India, you would find that the court cases related to property disputes is the largest. Property price is determined more by external factors such as location, connectivity and activities in the neighbourhood,” adds Chandra. One of the many things that the real estate sector needs urgently is digitization with all records available online. This would not only bring transparency but open up the market for genuine buyers and sellers. Some efforts have started in this direction.
Elaborating further, Namita Wahi, fellow, Centre for Policy Research, says: “On the basis of our review of all land acquisition cases before the Supreme Court over the past 66 years (1950 to 2016), 9.2% of all litigation regarding land acquisition is with respect to housing. This includes, affordable housing (73.5% of all housing related litigation), private housing (14.5%) and government housing (12%).”
Dr Niranjan Hiranandani, National President, NAREDCO, says that the government’s push will help create and meet the real demand. “It will open doors for ‘fence-sitters’ to turn into ‘end-users’. Actual buyers will get benefited and carpet area sop will push sales.” He adds that the enhanced incentive in the form of increased percentage of interest subvention will benefit home buyers, “as more options in the form of larger size of apartments will now be available”.
Notwithstanding the fact that the challenge of creating affordable housing for the common man will most likely be achieved through various initiatives of the government, policymakers need to tread carefully, given the results it has given in the past around the globe.
Read the article on The Economic Times website.