Housing finance requirements in India for years 2016 – 2022

Abstract

Housing shortage in India has been a continuous problem in India even after sixty years of independence. Despite multiple efforts of successive governments, estimates reveal that there is a housing shortage of approximately 18 million urban housing units and 40 million rural housing units in India. The Pradhan Mantri Awas Yojana was launched with an objective of providing about 20 million urban housing units and 40 million rural housing units by the year 2022. The objective of this academic project is to estimate the total financing requirements for meeting the housing needs in India for the next five years viz. 2016 – 2022. The project looked at the housing shortage problem and the need for housing finance from a NHB perspective in the light of Pradhan Mantri Awas Yojana. We adopted an analytical approach whereby we commenced by estimating the housing shortage at a state level for different categories covered under the scheme (Economically Weaker Sections(EWS) and Low Income Group(LIG) in urban areas, Above Poverty line(APL) and Below Poverty line(BPL) in rural area). Using the standard definitions of such houses and the costs incurred in housing projects like land cost, construction cost etc., we obtained the per housing unit cost for different categories at a state level. From these calculations and justified assumptions, we obtained the total financing requirements for the housing requirements which was then followed up with a sensitivity analysis to determine the dependency of total financing requirements on the inflation rate and the FSI constraint. The most likely scenario has been used for further calculations. Also, the Pradhan Mantri Awas Yojana(Urban) has four different schemes which require different amounts per housing unit. We developed a framework for calculating the total financing requirement with appropriate proportions in each of these four schemes. The total requirement from the NHB has been obtained by observing the trend in housing financing from different lenders for the end consumers and the refinancing plans for these lenders from the NHB.