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Abstract:
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Housing is one of the primary human needs. It is second only to the need for food and
clothing. From a macro perspective, housing is an industry that can prove itself to be a
growth engine for a nation, particularly a developing nation like India. Housing has
been one of the top priorities for the various governments in India since the seventies.
The need for housing has been increasing at a phenomenal pace in India and so also
the need for housing finance. Since the growth in supply of housing could not keep
pace with the growth in its demand, housing shortage has been on the rise over the
years. Housing finance industry which was relatively dormant till the early nineties
underwent sweeping changes ever since the initiation of financial sector deregulation
measures. Financial deregulation measures brought about several changes in this
industry, the first and foremost being the fast growth rate in the industry coupled with
cutthroat competition among the industry players. This trend has been quite prominent
since the entry of commercial banks into this arena. Accordingly, there has been a
surge in the growth of retail (personal) loans segment, particularly in respect of
housing loans. This is evident from the fact that housing loans disbursed by banks as a
percentage of their total loans has increased from just 2.79% as of end-March 1997 to
as high as 12.52% as of end-March 2007. Thus, there has been an unprecedented growth rate in the disbursement of housing loans by banks, and as of 31 March 2007
the outstanding balance of housing loans by all banks in India stands at Rs.230689
Crore, as against just Rs.7946 Crore as of 31 March 1997, the growth rate being 35.82
%CAGR (for the eleven years’ period, FY 1997-‘2007). However, in spite of the
impressive growth in housing finance over the years, there are growing apprehensions
regarding its inclusiveness, i.e. accessibility to the common man, the underprivileged
sections of the society to housing finance etc. Of late, it is widely recognized that
formal housing finance system, particularly the commercial banks (CBs) – most
dominant among the players – is fast becoming exclusive in operations, with nearly
90% of the total housing credit going to the rich and upper middle income group,
primarily the salaried class. The case of housing finance companies (HFCs) is quite
similar in this regard. The poor and other marginalized sections are often deprived of
adequate credit facilities for housing purpose. Studies have revealed that urban
housing poverty is much more acute than the rural probably because of the very fast
process of urbanization coupled with constant rural to urban migration |