The Pivotal Role Of Housing Finance In India For Achieving The Mission Of Housing For All by 2022

Always aspired to purchase a home but poor financial health, high-interest rates, and steep price tags kept deterring you? Thanks to the government’s supportive policies and easy home loans, your dreams of home ownership are likely to become a reality by 2022.

To ensure that every Indian has a roof over his head, Narendra Modi launched the Pradhan Mantri Awas Yojana (PMAY) under the Credit Linked Subsidy scheme (CLSS). The program, aimed at creating affordable housing for all by the year 2022 is likely to propel the growth of the realty sector. Given that adequate funding is an important component of this mission, home loan players can capitalise on the opportunities at hand and surge ahead. Let’s shed some light on why housing finance in India is expected to play a pivotal role in the Government’s ambitious “Housing for All by 2022” enterprise.

Quantum of Loan Doubled:

The PMAY kicked off to cover the housing needs of the economically weaker sections (EWS) and the low-income group (LIG). Under this scheme, beneficiaries can avail a loan up to 6 lakh at a concessional interest rate of 6.5% compared to the average home loan rates (9-10%). The banks and other institutional lenders will be reimbursed the subvention amount from National Housing Bank (NHB). With the inclusion of the mid-income group (MIG) in the scheme, the quantum of loans has been doubled. As a result housing loans within the range of 9 to ₹12 lakh will get an interest subsidy of 4 % and 3 % respectively. This greater outreach will give the housing finance companies (HFC) a fillip.

Housing Loans Rising:

The market for large home loans is quite sluggish, while for the affordable sector it has witnessed a considerable boom in the last fiscal. The PMAY initiative and the liberal incentives offered under CLSS are likely to boost this trend further. Under this scheme, two crore houses are in the pipeline for construction for the urban poor with facilities (water, 24/7 electricity & toilets) by the year 2022. This will make the real estate segment attractive and be a growth driver for housing finance in India.

Extension of Loan Tenure:

The government extended the loan tenure from 15 to 20 years under the CLSS scheme to facilitate easy repayment. This move is favourable for lending institutes like PSU’s, cooperative banks, microfinance establishments as well as home finance firms that are extending subsidies to fulfil the government’s objective of affordable housing for all.


The Budget 2017-18 has increased the provision for the PMAY from Rs 15, 000 to Rs 23, 000 cr. in the rural areas. Also, the government has modified the qualifying benchmark for affordable housing from 30 sq. Meters to 60 sq. Meters of carpet area in the four metros. This step will not only increase the size of the affordable housing segment and expand the borrower base across the nation but will also help the mortgage finance companies to prosper.

Focus on Housing Finance Stocks:

The government “housing for all” program has had a positive impact on the home finance market. The sector has exhibited a phenomenal growth rate, and experts believe the demand is likely to accelerate further in the coming years. This has grabbed the eye balls of big investors who are optimistic and betting aggressively on reputed housing finance stocks.

Well, the writing on the wall is crystal clear. The government’s mission of ‘housing for all by 2022’ has put the spotlight on real estate and in turn on the housing finance sector.

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