homework help,online homework help,online tutors,online tutoring,research paper help,do my homework, https://www.homeworkping.com/

1. Get Homework Done
Homeworkping.com
Homework Help
https://www.homeworkping.com/
Research Paper help
https://www.homeworkping.com/
Online Tutoring
https://www.homeworkping.com/
click here for freelancing tutoring sites
Housing Problems
*Dr. S.N.Yogish
Introduction:
India is home to over 1.1 billion people. With about one in every sixth
person in the world living in India, housing perforce assumes significant
importance. Successive Indian governments have regarded housing as a
primary need of its people. The need to provide affordable housing has been the
reason behind state interventions in the sector. Housing policies, however,
tended to be framed by the government from a social rather than economic
perspective. Despite explicit recognition of the need for housing, housing
programmes received low public investment. Housing and subsidies were
largely synonymous and hence the tendency to view housing finance from the
angle of the government’s cash budget and not as a developmental activity with
tremendous spin-offs to the economy.
A significant trigger of change in housing policies in India occurred
pursuant to the global shelter strategy adopted by the United Nations (UN)
1

2. countries to establish comprehensive, multi-faceted housing programmes to
provide shelter for all. The Global Shelter Strategy’s main aim was to ensure
social, economic and environmental sustainability while simultaneously
upgrading living conditions. A defining feature of the resolution was that it
sought to involve national governments, private bodies as well as non-
governmental organizations in formulating housing programmes. This provided
the impetus to the Indian government in drafting its first National Housing
Policy, which was tabled in Parliament in 1992 and adopted in August 1994.
Subsequently, with a national agenda of ‘shelter for all’, a new housing and
Habitat Policy was adopted in 1998. This proved to be a watershed with the
government’s recognition that it should withdraw from direct participation in
the housing and housing finance sector and instead take on the role as
facilitator, thereby creating an enabling environment to encourage private
sector capital.
Reader, Department of Economics, Kuvempu University, Shankaraghatta.
In 2000, UN members adopted eight millennium Development Goals
ranging from eradication of poverty to developing a global partnership for
development. For housing though, it was the seventh goal that would prove to
be important. Goal 7 called for “ensuring environmental stability” and assigned
UN-HABITAT the responsibility of assisting states to monitor and gradually
attain the “cities without Slums” target, popularly known as Target 11. This
target calls on member states to achieve “a significant improvement in the lives
of at least 100 million slum dwellers by 2020”. For India, this will prove to be
daunting. In 2001, India’s population estimated to be living in slums was 61.8
million (Ministry of Urban Employment, 2005).
Survey of Housing Indicators:
List of 52 urban centres and countries included in this paper:
*. Cities from low-income countries:
2

3. Dar es Salaam, Tanzania, Lilongwe, Malawi, Dhaka, Bangladesh,
Antananarivo, Madagascans, Ibadan, Nigeria, Delhi, India, Nairobi, Kenya,
Beijing (Peking), China, Karachi, Pakistan, Accra, Ghana.
*. Cities from low-middle-income countries:
Jakarta, Indonesia, Cairo, Egypt, Harare, Zimbabwe, Dakar, Senegal,
Manila, Philippines, Abidjan, cote d’Ivoire, Rabat, Morocco, Quito, Ecuador,
Amman, Jordan, Bogota, Colombia.
*. Cities from middle-income countries:
Bangkok, Thailand, Tunis, Tunisia, Kingston, Jamaica, Istanbul, Turkey,
Warsaw, Poland, Santiago, Monterey, Mexico, Algiers, Algeria, Kuala Lumpur,
Malaysia, Johannesburg, South Africa.
*. Cities from mid-high-income countries:
Caracas, Venezuela, Rio de Jameiro, Brazil, Budapest, Hungary,
Bratislava, Slovakia, Seoul, Republic of Korea, Athens, Greece, Tel Aviv, Israel,
Madrid, Spain, Singapore, Hong Kong.
*. Cities from high-income countries:
London, United Kingdom, Melbourne, Australia, Amsterdam,
Netherlands, Vienna, Austria, Paris, France Toronto, Canada, Washington,
D.C., United States, Stockholm, Sweden, Tokyo, Japan, Helsinki, Finland,
Munich, Germany, Oslo, Norway.
Habitat Housing Indicator:
Housing Tenure:
Income Grouping:
Cities in:
% of dwelling
Units
Owned by
occupants
% of dwelling
units
Public Housing
% of Total
unauthorized
housing stock
Low-income countries
Low-middle-income
countries
33
52
59
13
11
14
64
36
20
3

4. Middle-income countries
Mid-high income countries
High-income countries
55
51
53
13
3
0
Housing Quality:
Income Grouping:
Cities in:
Floor area
per person
(M2)
Persons per
room
% of
permanent
units
structures
% of dwelling
with water
connected
Low-income
countries
Low-middle-income
countries
Middle-income
countries
Mid-high income
countries
High-income
countries
6.1
8.8
15.1
22.0
35.0
2.47
2.24
1.69
1.03
0.66
67
86
94
99
100
56
74
94
99
100
Government expenditure:
Income grouping: US $ Regional grouping:
US $
Cities in: Per person Cities in: Per person
Low-income
countries
Low-middle-income
countries
Middle-income
countries
Mid-high income
countries
High-income
countries
15.0
31.4
40.1
304.6
813.5
Sub-Saharan Africa
South Asia
East Asia
Lat Am/Caribbean
Eastern Europe,
Greece, N Africa/
Middle East
W Europe, North
America and
Australia
16.6
15.0
72.5
48.4
86.2
656.0
Source: Global Report on Human settlements 1995.
4

5. Role of Housing:
Macro economic stability and the housing sector are inextricably linked.
It is estimated that for one Indian Rupee (Rs.) invested in housing; Rs. 0.78 gets
added to the gross domestic product of the country. The housing sector has
strong backward and forward linkages to over 250 ancillary industries. After
agriculture, the housing and real estate industry is the second largest
employment generator. It is estimated that the construction sector provides
direct employment to 16 per cent of the country’s workforce, which is growing
at a rate of 7 percent per annum. The housing sector alone accounts for 58 per
cent of workers in the construction sector. However, nearly 55 percent of these
workers are in the unskilled category.
In India, residential housing accounts for almost 80 percent of the real
estate market in terms of volumes and has been growing at 30 to 35 percent
annually (CRI SIL, 2006).
Housing Scenario in India:
The progress made by the construction industry of any country could be
considered as the index of development of that country. Further, the number of
pucca housed built in any country could be another index. While there has
been a progressive rise in stock of housing in India since independence, the
speed thereof has not kept pace with the rapid growth of population and
urbanization. As a result, the shortage of accommodation is increasing
continuously and the situation has become acute in urban areas.
Total population and percentage of population in unauthorized
construction.
Year Population
in million
Population in authorized
accommodation, million %
1961
1971
1981
1991
2003
4,15
5.97
8.23
9.93
12.50
0.50
1.60
3.25
4.45
6.25 (approx)
Source: Table 500-012 of census India 2001.
5

6. From the above table the following picture emerges:
• While the total number of households (housing shelter) have increased
by about 30 percent, between 1961 to 2003, the total shortage continues
to be the same at about 20% of the total households.
• The increase in shortage of housing in urban areas has been 50 percent
as against 25 percent in rural areas.
Shortage of Housing:
Official and updated statistics on the shortage of housing units in the
entire country is not readily available. According to the National Buildings
organization (NBO), the components of housing shortage include
a) the excess of households over houses,; including homeless households,
b) congestion i.e. the number of married couples requiring a separate room,
c) replacement or up gradation of unserviceable houses and
d) obsolescence/replacement of old houses.
As per the census 2001, housing completions is around 5 houses units per
1,000 population per annum in India. The average annual housing completion
in urban areas per 1,000 population was steady at around 7 housing units
during the past three decades. This however, is lower than the minimum
threshold as recommended by the United Nations of 8 to 10 housing units per
1000 population for developing countries (NHB Trend and Progress Report,
2004).
Addition of Census Houses Per 1000 population
1971-81 1981-
91
1991-
01
Urban
Added Census Houses
(million)
Added Households
(million)
Annual Housing
Completions/1,000
11.55
10.00
7.23
16.55
11.64
7.61
19.53
12.95
6.83
6

7. population
Rural
Added Census Houses
(million)
Added Households
(million)
Annual Housing
Completions/1,000
population
19.25
15.50
3.66
29.02
19.16
4.62
34.56
25.61
4.65
Total
Added Census Houses
(million)
Added Households
(million)
Annual Housing
Completions/1,000
population
26.53
25.50
3.87
45.58
30.80
5.39
54.08
38.56
5.26
Source: Census 2001, NHB Trend and Progress Report, 2004.
In terms of distribution of households according to rooms occupied, as
per Census 2001, 39% of households lived in one room, 30% in 2 rooms, 14%
in 3 rooms and 17% in more than 3 rooms. While the median number of rooms
is 2, over the last four decades, the number of households living in 1 room has
declined, both in rural and urban areas.
Housing conditions in India:
Housing conditions are a key indicator of socio-economic development.
The National Sample Survey Organisation (NSSO) uses the classes, katcha,
semi-pucca and pucca to differentiate between the types of homes in India. a
katcha house is built with non-durable materials like unburnt bricks, mud,
thatches, leaves and bamboo. A pucca house is one built with permanent
materials like oven burnt bricks, concrete, stone blocks, cement, iron or other
metal sheets and timber. A semi-pucca house is built both katcha and pucca
materials.
7

8. Percentage Distribution of Households with Dwelling units by Type of
Sturcture
(F
igures in %)
Area type Pucca Semi-pucca Katcha
Rural
Urban (including
slums and squatter
areas)
36
77
43
20
21
3
Source: NSSO, 2004.
Statistics show that exclusive amenities available in homes are also
improving. There, however, still exists a wide disparity between amenities
available in rural and urban areas as well as amenities available to various
income groups.
Distribution of housing by Exclusive Amenities
(fig
ures in %)
Amenities 1981 1991 2001
Urban (%)
Safe drinking water
Toilet facilities
Electricity
connections
74.10
57.40
61.60
81.60
63.60
75.90
90.60
73.70
87.60
Rural (%)
Safe drinking water
Toilet facilities
Electricity
connections
26.30
--
14.30
55.90
8.80
31.10
80.50
21.90
43.50
All-India (%)
Safe drinking water
Toilet facilities
Electricity
connections
37.90
--
25.70
62.70
23.50
43.00
83.30
36.40
55.80
8

9. Source: NHB Trend and Progress Report, 2004, Census 2001.
Households savings:
Since 2001, the household sector has shown a preference for saving in
the form of physical assets relative to financial assets. This could partly be
attributed to the soft or lower interest rate regime in the recent period (RBI,
2005). While physical assets include livestock, jewellary and farm implements
amongst others, housing accounts for the majority of physical assets. Most
people investing in a house are first time home buyers and genuine users of the
home. Further, the predominance of physical assets over financial assets is also
due to the fact that availability of housing finance has improved in the recent
period and therefore made housing more affordable.
Household Savings as a percent to GDP
(figures in
%)
2001 2002 2003 2004 2005
Household
Savings
21.2 22.0 23.0 23.5 22.0
Financial 10.2 10.8 10.3 11.5 10.3
Physical 11.0 11.2 12.7 12.0 11.7
Source: Economic Survey 2005-06
Nature and Scope of the Housing Problem:
The Indian economy is undergoing a paradigm shift as it undergoes
a transition from a rural to an urban society. With a average gross domestic
product (GDP) growth of over 7 percent over the last five years, the driver of
growth is predominantly stemming from the services sector which now accounts
for over 50 percent of GDP. Changing demographics, a rising urban population,
higher disposable incomes and fiscal incentives are encouraging more people to
buy homes. However, the archaic legal framework and lack of mortgage
penetration, especially at the lower income strata, continue to be challenges in
alleviating the housing problem in India.
Based on the 2001 Census, for a total population of 1.03 billion,
the number of Census houses stood at 249 million, of which 177 million (71
percent) were in rural areas, while 72 million (29 percent) were in urban areas.
9

10. In 2002, the average number of household members was 5.15 in
rural areas and 4.47 in urban areas (NSSO, 2004). In line with international
trends as well as with the decline of the joint family system and the rise of the
nuclear family, it is expected that the average household size will continue to
decline. This, coupled with the fact that more individuals continue to migrate to
cities in search of better livelihoods implies that there will be additional
pressure on availability of affordable housing.
Some of the key challenges and issues preventing the increase in
affordable housing stock are enumerated below:
Rapid Urbanization:
Housing needs are strongly influenced by growth in population and
demographic changes. While in the recent period the total population growth
has been slowing down, the urban population continues to grow rapidly. The
urban population has increased from 20 percent in 1971 to almost to 34
percent currently (SSKI, 2006). Urbanization is particularly concentrated in
urban agglomerations or mega cities, defined as cities having a population in
excess of one million people. These mega cities account for almost 40 percent of
the total urban population. As per the 2001 census, there were 35 mega cities
and the polarization of growth towards them poses a greater challenge in
providing housing in these areas as the housing stock is unable to keep pace
with demand (Nallathiga, 2005). This is exacerbated by the continuing trend of
in-migration to urban areas. As a result, there has been a disproportionate rise
in slums. For instance in Mumbai, almost 60 percent of the total population live
in slums.
Restrictive Laws:
One of the major issues constricting the addition of homes is the series of
archaic laws governing the Indian housing and real estate sector. Of the over
100 laws governing various aspects of real estate, many date back to the 19th
century. Significant ones are the Indian Contracts Act, 1872, the Transfer of
Property Act, 1882 and the Registration Act, 1908. Despite the plethora of laws,
the legal framework requires a complete overhaul to make it more relevant to
today’s requirements.
10

11. These laws often lead to prolonged litigation and create artificial scarcity
of land, thereby raising prices. In India, land is a state subject. Thus, while the
centre may make amendments and issue guidelines, the responsibility for
implementing it remains optional for a state government. With 28 states and 7
union territories (areas directly managed by the central government), support
for reforms has varied considerably from state to state.
High Transaction Costs:
Another issue that constricts the addition of official housing stock is the
high transaction costs that go with getting a home registered. At present, every
home needs to pay stamp duty at the time of registration. Stamp duty rates
vary wildly between stats though, with some states capping the total amount of
duty that can be paid, and others with duties as high as 15 percent of the value
of the property. In contrast, most of the developed world mandates a stamp
duty at a rate in between 1-2 percent. In some cases, high stamp duty leads to
massive understatements on the proceeds of a sale. Thus, there are a large
number of homes in the grey market, which prevents the formation of a genuine
property market.
While the National Housing and Habitat policies have called for
rationalization of stamp duties across all states, this has not happened so far.
For the states, collection from stamp duty is the second largest revenue earner
after excise duties. This explains their reluctance in reduction of these rates.
Lowering stamp duty, however, will ensure better compliance plugging present
loopholes. Currently, if there is no registration, a transfer is not deemed to have
taken place and capital gains tax can be avoided. This results in losses to the
exchequer on various counts: understatement of sale proceeds, non-
registration, non-payment of stamp duty and capital gains tax evasion. Further,
a number of sale transactions are done through the power of attorney route
providing an opportunity to evade transaction costs pertaining to stamp duty,
registration and property taxes.
Lack of Clear Land Titles:
Establishing home ownership in India is difficult due to the lack of clear
land titles. In India, the state does not certify a title to housing or land property
11

12. and ownership is established only by a sequence of earlier transfers (Planning
Commission, 2002). Such tenuous titles to land have led to non-transparency
in property transactions as well as widespread disputes and legislations. In
effect, the real estate market sees a distortion in its formation. The tenth five
year working group recommended computerization of land records by the year
2005, but this has not been implemented in many states.
Fragmented Market:
The Indian housing market is highly fragmented with the unorganized
sector accounting for over 70 percent of the housing units constructed. The
unorganized sector of the housing market is characterized by local small
builders and contractors. The organized sector accounting for the balance 30
percent comprises larger developers as well as government and other parastatal
entities involved in housing and construction activities. Typically, organized
developers tended to be niche players concentrating on a particular geographic
location rather than having a pan-India presence. It is only recently that a few
large, corporatised developers have attempted to make their presence felt at an
all-India level.
Lack of Data:
Lack of reliable data continues to be a strong drawback for the housing
sector. For instance, in the US, housing starts that measure privately owned
housing units started and the number of building permits given is released on a
monthly basis. Housing starts is a primary indicator of the health of the
economy and this data is known to more markets as it is a good pointer home
sales and spending patterns in general. It is also used to plredict the residential
investment portion of the gross domestic product. In India, there is no such
data available. Neither is there any reliable data on home sales, purchases or
movements in property prices.
Another problem is that there is no frequently available official data on
outstanding mortgages, disbursements or market share of all players in the
housing finance market. Banks include loans given to housing finance
companies who in turn on-lend to borrowers as part of their housing loans and
hence results in an element of double counting. Further, banks only required to
disclose their total retail portfolio as part of segmental reporting and are not
12

13. mandated to disclose the composition of the retail portfolio. Most analysis is
thus based on estimates.
Low Mortgage Penetration:
Despite the frenetic pace of growth in housing finance over the past 5
years in India, mortgage penetration as a percentage of GDP continues to
remain low, at 4 percent. This is extremely low compared to countries such as
US and UK at over 60 percent of GDP. India’s, performance, even when
compared to its Asian peers shows low penetration. On the flip side, this means
that there are considerable growth opportunities in housing finance. This is
further corroborated by the fact that despite the impressive rate of growth in the
housing finance sector in the recent period, financing through the organized
sector continues to account for only 25 percent of the total housing investment
in India (ICRA, 2003).
A Cross- Country Comparison of Mortgage to GDP Ratios
Country Mortgage to GDP
Ratio (%)
India
China
Korea
Malaysia
Hong Kong
Germany
USA
UK
4
11
14
22
50
52
64
72
Source: European Mortgage Federation, HDFC, 2006
Housing Finance in India:
Robust growth in the housing finance market
The housing finance market has recorded Robust growth in the last five
years, clocking a CAGR of about 40% between FY 1999 and FY 2004.
Residential mortgage debt as a % of GDP was a mere 0.58% in 1994 which has
moved up to 2.21% in FY 04. Falling interest rates in housing loans 17% (1996)
to 7.5% (2004) combined with increasing loan tenures, increasing loan to value
13

14. ratio and rise in the installment to income ratio are precipitating high growth
rates in the housing finance market.
Prospects and Recommendations a Future Outlook:
Future Outlook
Though Indian housing finance system has got its own share of
problems, given the huge tapped housing loan market, government support and
favourable macroeconomic environment, reasonably resilient banking system,
industry has got excellent growth prospects. The present growth rate at about
40%+, appears to be a sustainable the foreseeable future.
The tenth plan has estimated the urban housing shortage at the level of
8.9 million dwelling units. The tital investment required for the above is
estimated at the level of Rs. 4,15,000 crore. And such a huge amount cannot
raised by the Central and State Governments alone. Rather active private sector
participation is very much essential for achieving this goal, at least partly.
Recommendations and Insights:
Greater Uniformity of Standards
Thus, there is a need for following measures to help the market perform more
efficiently:
• Adoption of uniform practice by the housing finance industry relating to
matters like appraisal and documentation, prepayment of housing loans,
conversion of fixed rate loans into floating rate loans etc.
• Greater transparency in dealings with the borrowers to enable them to
exercise informed choices about products and lending institutions.
Promotion of Securitization:
In the budget 2002-03, the FM announced that NHB would launch a
mortgage credit guarantee company will work to achieve the following goals:
• Generate a greater volume of mortgage lending in the Indian market
• Lower down payment requirements to as low as 5%
• Broader the eligibility for mortgages, and
• Extend mortgage repayment periods up to 25 years.
These changes will facilitate capital market development by promoting
securitization and increasing home ownership. Further, measures to promote
14

15. residential mortgage backed securitization market in India can further
strengthen our housing finance system and make it more competitive.
Central registry for housing mortgages:
In order to address the issue of rising incidence of frauds in housing
finance, section 20 of the SARFAESI Act introduced the provision of setting up a
central registry to provide a statutory backing to the security interest in favour
of banks and financial institutions and enabling them to claim priority over
other claimants while enforcing the securities.
ALM:
Techniques and schemes should be put in place for a proper asset
liability management and explain the generation followed ALM techniques to
counter an issue that could threaten the very existence of an institution.
Autonomy to Banks:
We propose to the banks through RBI, to undertake lending for housing
purposes as it will provide a remunerative avenue. The RBI has permitted
banks to grant loans for housing schemes up to certain limits from their own
resources. Introduced stipulations regarding maximum loan amount and
margins, charging of penal interest, security, term of the loan, graduated
installments.
Interest rates not too much of a concern:
Both the banks and HFCs are increasing their business at the stake of
decreasing returns. However, a consoling factor is that mortgages are just 2% of
GDP and about 10% of the advances of the banking sector. Hence even the
bubble were to burst, it may be withstood by the country.
Bibliography:
15

16. *. Census India (2001) Census of India – 2001, online, HTTP.
www.censusindia.net
*. CRISIL (2006) “Demand Fundamentals Support Mortgage Asset Quality’,
CRISIL insight, January 2006.
*. Daily News and Analysis (DNA) (2006) “Reserve Bank Must Let Housing Boom
Be” DNA Mumbai, Friday, April 21 2006, 22
*. Economic Survey (2006) Indian Economic Survey 2005-06, Online, HTTP.
http://indiabudget.nic.in
*. Ernst and Young (E&Y) (2005) ‘Effect of Environmental Impact Assessment’,
E&Y Transaction Advisory Services, November 2005.
*. Financial Express (2006) ‘Sarfaesi Act Checks Bad Loan in Housing’ Financial
Express Mumbai, Thursday, March 23, 2006.
*. Garg, Y.K. (1998) ‘New Directions in Housing Finance: India case Study’,
paper prepared for the International Finance Corporation, presented at Asia
Housing Finance workshop, Bali, Indonesia, February 5-6.
*. HDFC (2006) Corporate Profile. Online, HTTP.
*. Housing finance in India – by ICFAI press
*. Housing finance. Org – www.housingfinance.org/pdfstorage/7640060605.pdf
*. India: Studies and Technical Advisories in Housing Finance – Urban Institute
*. NHB report on trend and progress of housing in India, June 2004
16