Mr Arun Tiwari, Outgoing Chairman and Managing Director, Union Bank of India

  1. The rapid urbanisation in India is creating large housing shortages. How do you think financial institutions can play an important role in solving the problems of basic housing amenities
  2. There is greater role for financial institutions in increasing home ownership in India. Fortunately, demography is on our side. Sixty five percent of our population is below 35 years of age. The average age is around 28 years, down from 43 years in year 2000. It enables higher tenure of loans. Importantly, it also helps in checking instalment-to-income ratios at low levels; presently ranging from 35-40%. Together, this enhances affordability. Banks, which continue to dominate the Indian financial landscape, are stepping up their sales capabilities, re-designing processes to reduce turn-around time (TAT) and digital initiatives to provide better experience for home buyers. Technology has helped in loan origination as under-writing the standard of retail loans has improved with digital trails of the customer, e.g. CIBIL score, utility payments history, etc. Meanwhile, there is need to increase supply of affordable homes. For this, enabling regulations is a must. In cities like Mumbai, where horizontal expansion of urban space is limited by geography, there is need for vertical scale-up of buildings. It will require investing in better capabilities for construction, service and maintenance, however. For cities where horizontal expansion is feasible, a robust transport infrastructure is a must, with better vehicle speed reducing commuters' time, on average. It will dilute the stress on parcels of land, thereby cooling demand, and enhancing affordability. Financial institutions have an important role, both as supplier of financial resources as also the facilitator of know-how across borders in building infrastructure. Going forward, with a falling interest rate, higher liquidity, Real Estate Regulatory Act (RERA), budgetary push on affordable housing and goods & services tax (GST), the real estate sector will be more evolved, transparent and corporatised.

  3. Stagnant income levels and rising real estate prices is slaying dreams of affordable housing for the common people? How can we address the serious issue
  4. India is a fast growing economy. As such, the affordability issue is less of stagnating incomes, but urban real estate prices outpacing growth in income of common people. We have to address this on both with demand and supply side measures. On the demand side, growth alone can pull off the majority of urban dwellers out of slums and if it matched with access to cheaper finance, the dream of own homes could be very well realised. Better regulated housing market will help bridge trust gaps between builders and buyers, by allaying delays in construction and possession by home buyers. On the supply side, government has to look for cutting bureaucratic barriers and enable pooling of fragmented land holdings. Affordable housing has been accorded infrastructure status, thus eligible for priority lending by banks. It should help in channelising bank finances to the sector.

  5. Housing finance is accessible to select population. What are financial institutions doing to address this issue, particularly making people financially literate
  6. India has witnessed fast gains in delivering universal financial access with every household having a bank account at present. The government followed it with expanding access to credit under MUDRA scheme, as well as social security schemes on insurance and pension. Universal financial literacy ― cutting across various stratum of society, graduates or mere literates ― is the bare minimum our efforts must lead towards. At Union Bank, for example, the financial literacy efforts continue with its 26 Financial Literacy & Counselling Centres (FLCCs). Earlier, we declared Thursday as non public working day for rural branches for organising financial literacy camps. It was to spread awareness on linkages, benefits and entitlements under varied government schemes. The participatory tools and training aids included videos, films, plays, posters, FAQs, etc. For urban communities, we are leveraging conventional mass media, social media, etc. for educative awareness campaigns. Further, awareness programmes are conducted by trained personnel in town hall meetings. Our aim has been to raise awareness about finance enabling a better quality of life for everyone.

  7. The government has given housing loan interest subvention to boost low cost housing. To what extent do you think this will boost affordable housing, particularly for people living in metros
  8. Interest subvention is a welcome move to enhance affordability for home buyers. Importantly, the government is now crediting subsidies frontloaded in the eligible beneficiaries accounts. Besides, the government has also tweaked profit-linked income tax exemption for promoters of affordable housing, thus broadening the net for eligible builders. These together with measures to enhance transparency and trust-building will go a long way in expediting the ‘housing for all’ vision of the government.

  9. The government has announced a slew of measures to stop the regeneration of black money, and address the issue of corruption. Do you think this will bring sanity to real-estate prices and affordability
  10. Demonetisation was partly motivated by the desire to rein in real estate prices which have spiralled out of reach for a great majority of Indians. Cash intensity of transactions in real estate market had risen over the years. Demonetisation and the subsequent initiatives to curb cash dealings, have a dampening effect to an extent. However, credit flows have more bearing on real estate prospects than anything else. On a positive note, demonetisation has resulted in a major reduction of home loan interest rates, which have enabled affordability for buyers. Developers offering good deals and discounts could gain share of market, now ideal for serious end-users. Importantly, developers with transparent business practices have not been affected by demonetisation, and have instead witnessed sales growth.

  11. What initiative should the government take to make housing finance available for all Indians
  12. Even before demonetisation, the real estate sector witnessed important reforms like Real Estate Regulatory Act (RERA), Benami Property Act, and Real Estate Investment Trust (REITs), etc. during first half of year 2016. These reforms created positive ripples in the sector. As a result, residential markets are seen growing, setting aside a long lull of almost three years. Even the commercial office market has noted gains, as reflected in declining inventories. Deeper mortgage markets benefit homeownership; which in turn is welfare improving; the government is seized of this linkage.

  13. What larger role private sector can play in making housing finance available for all Indians
  14. India has a housing shortage of about 6 crore units (rural: 4.0 cr and urban: 1.9 cr units). Further, to achieve the ‘housing for all by 2022’ vision of our Honourable Prime Minister, India would require about 11 crores housing units on a pan India basis. There are estimates that India’s housing sector may require investments of over USD 2 trillion by 2022. This translates to about USD 250 to 300 billion annually. Contrast this with banking system’s housing loans outstanding at USD 132 billion. Going forward, urban housing will account for about 85% to 90% of the total investments; the focus should be on affordable urban houses, which is 70% of the total urban housing requirement. Opportunities are indeed aplenty for the private sector to step in and help bridge this glaring investment deficit.


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