The retail housing sector has been growing at a brisk pace even though GDP growth has fallen below 5% in the last two years. Much of this success could be attributed to the vibrant mortgage industry and regulatory changes. The National Housing Bank, which is the regulator for mortgage firms, is now working on ways to boost low-cost housing finance. In an interview, NHB chairman RV Verma tells Arun S and Raj Kumar Ray that more housing reforms are on the anvil to bridge the gap in demand and supply. With such growth in the housing sector, Verma expects RBI's housing start-up and NHB's Residex indices to emerge as a set of major macro indicators. Edited excerpts:
How has the housing sector fared amid the general slowdown in the economy?
Unlike many other sectors, the housing sector has remained recession-proof. Overall, the housing sector has been very stable, given the growth and trends in retail lending. The asset that is created typically appreciates in value while generating a multiplier effect on other sectors with all its positive externalities. With rising demand, both banks and housing finance companies (HFCs) are looking at retail customised products.
There is ongoing competition in the industry, which is promising to be beneficial and in the interest of buyers/borrowers. Competitive lending rates and prices can lead to sustained rising demand. Earlier, acquiring a house used to be the last project in one's life. Now, it is perhaps the first. The society has become very aspiration-driven, which is also fuelling the demand. What has now made a substantial difference to the scenario is the easy availability of credit and customized housing loan products.
With rise in confidence, the mortgage industry has registered a growth of nearly 20 % as at end March 2014. This has been possible with the rise in demand in tier-II and tier-III cities. And mind you, there has been no dilution of due diligence even in smaller cities. The gross NPAs in the housing sector has been lowest among all sectors at 0.70% for HFCs and 1.81% for banks as on December 2013.
With inflation moderating, is there a case for interest rates, especially home loan rates, to soften?
One positive development is that the mortgage lending industry is fully integrated with the financial sector and therefore, interest rate movements in the broader financial market influence the trends in the mortgage market. However, the home loan industry is