​A Bumpy Road Ahead For Modi Government’s New Housing Policy: Moody’s

In June 2014, Prime Minister Narendra Modi had announced an ambitious plan by promising ‘housing for all by 2022.’ Now as per a report by rating agency Moody’s, its Investors Service said that this housing scheme along with liberalised FDI norms will boost the residential mortgage backed securities (RMBS) market. However, Moody’s added that the sector faces a lot of developmental challenges, according to a PTI report.

With the government vision to provide ‘housing for all,’ the funding needs of the domestic mortgage lenders grow in step, according to the Moody’s report. It also added that there is scope to develop RMBS market into a larger funding source, especially for those lenders who have focused on affordable housing.

The report added, “Prime Minister Narendra Modi’s ‘housing for all by 2022′ goal will boost the emerging RMBS market, though challenges remain for the development of the sector.”

The RMBS issuances, in 2014, rose 75% to Rs 5,300 crore. However, the Moody’s report asserted that this growth was from a low base and the sector remains relatively small, as per a PTI report.

In urban areas, the country faces a housing shortage of about 18.78 million units, the rating agency estimated.

By slashing minimum investment to $10 million, the Modi government has liberalised the FDI regime for the affordable housing sector. It has also removed the three-year lock-in period for exit.

In 2015, housing finance companies are expected witness a growth of 20-22% in their loan books.

A PTI report suggested, Moody’s also warned that new tax rules have led to lower post-tax returns for bank investors in RMBS. On the other hand, a tax-related legal apprehension has prevented mutual fund investors from participating in the market.
(Image: Indiatimes)