CHENNAI: Confederation of Real Estate Developers’ Association of India has called for relaxing bank lending norms to help real estate contribute more to the GDP and meet the goal of providing housing for all in the country.
In a meeting with RBI governor Raghuram Rajan in Mumbai on Tuesday, Credai office-bearers led by its president Getamber Anand and president-elect Jaxay Shah said real estate in India accounts for only 6% of the GDP and has a long way to go before reaching maturity. In comparison, in all major economies, real estate accounts for about 10% of their GDP. In the US, it accounts for 17% of the GDP. Housing has to be seen as a growth engine, especially when real estate remains the second largest employer in the country, after agriculture. It drives about 250 plus ancillary industries too.
The much debated real estate bubble and oversupply of houses are not really problems for India as the country is far below the level of developed countries in creation of housing stock. Hence, housing needs a supporting financial architecture and not a restrictive one, they said. Real estate bank credit as a percentage of the gross bank credit is less than 3%. Also, the net non-performing assets in real estate sector stand at zero. Yet, as per RBI’s latest financial stability report, the industry records the highest stressed advances ratio of 19.5%, followed by services sector at 7%.
Mining, iron and steel, textiles, infrastructure and aviation account for about 53% of the total stressed advances. Developers have suggested that the limits for priority lending in the housing sector be increased from 28 lakh to 50 lakh in metros, where the price of housing is high. Suggestions include making private sector eligible for slum rehabilitation loans, providing priority sector status to loans given to affordable housing projects and treating real estate as an infrastructure sector. Banks should come forward to fund land purchase as was the case till 2006, they said.
Credits ET Realty