Developers of affordable housing projects are finding it difficult to get increased credit from banks. Reason: Banks are yet to treat loans to budget housing as loans to infrastructure, despite the government according infrastructure status to affordable housing in the 2017-18 Budget.
The infrastructure status meant there was no need to maintain any cap on banks’ lending to affordable housing. Also, lower risk weight would be applied to such projects than real estate in general.
“Banks cannot lend more that 10 per cent of their balance-sheet to the real estate sector. Most banks had used up their 10 per cent lending to premium real estate projects. The infrastructure status only implies that there is now no cap on banks lending to affordable housing,” said Rajesh Krishnan, founder & CEO at Brick Eagle, an incubator of budget housing projects. “It is true that banks are still not lending to affordable housing sector despite the infra status,” he added.
Krishnan said affordable housing projects typically needed Rs 50 million to 200 million of project finance.
“Banks need to get a set-up with specialised teams to handle multiple small loans. That has not happened yet. Our firm belief is that banks will act only if affordable housing project loans are classified ‘priority sector’ (PSL),” he said.
In a recent interview with Business Standard, Anita Arjundas, managing director of Mahindra Lifespace Developers, which also develops affordable houses under ‘Happinest’ brand, said the government had said the goods and services tax (GST) would be reduced for affordable housing projects. “But today nobody gives such status. We have met the government on this issue. They have said there are lacunae and they will come back but they are yet to come back,” she said.
Another Mumbai-based developer said policy decisions take time to get implemented in the country. “The infrastructure status will come in a year or two,” he said.
While the government has come out with many sops for affordable housing in the form of 80IB, the credit-linked subsidy scheme (CLSS), and so on, there is no clarity on the definition of affordable housing, developers said.
Venkatesh Gopalkrishnan, CEO of Shapoorji Pallonji Real Estate, said: “They (the government) have to define affordable housing. We do not know whether the projects we are going to launch will be affordable or not. We also do not know what infrastructure status actually means.”