Lessons India Needs To Learn From Declining Home Ownership In US
The US housing market, according to a recent survey by National Association of Realtors, has witnessed a decline in home ownership. According to the findings of a white paper titled as Hurdles To Homeownership: Understanding The Barriers even with growing job market and depleting unemployment, home buying is at a 50-year low in the nation.
On the other hand, India's real estate market, which has been witnessing reforms including demonetisation, the coming of the Real Estate Law and the implementation of the Good & Services Tax, sees a large number of fence-sitting potential buyers. A picture different from what it is in the US at present. Here are some lessons that India can learn from the current real estate scenario in the US.
The changing financial situation
The US has undergone a phase where more than nine million homeowners experienced foreclosure due to loss of job. This has instilled fear among people towards home owning which is known to cause stress disorders among many. India, where growing unemployment is a concern, needs to target programmes and workshops to impart financial literacy to young homebuyers. These programmes can help them plan their home buying and even manage their mortgage if they face any hardship or lose their job during the loan tenure.
The availability of funds
Even buyers with excellent credit scores are finding it tough to take a home loan. As the credit standards are not yet normalised since the Great Recession and due to excessive lending in 2003, banks are ensuring to lend money only to credit-worthy purchasers. While with the onset of affordable housing, the banks have been approving home loans in bulk, the credit score of the individuals should not be ignored while sanctioning the loans. An unpaid loan could take the borrower up in the list of non-performing assets of the country.
Saving for down payment
Since young homebuyers in the US are repaying their student loans, there is little scope for saving for the down payment, especially in areas where rents are high. While in India, millennials are showing rising interest in home buying, lack of money for down payment is delaying the plan by a minimum of five years. The relaxed norms for upfront payment can be considered to encourage buyers.
Lack of affordable housing
For the Americans, the single-family housing shortage is one of the key reasons behind the declining ownership. Cities with higher migrated population and faster job growth are finding it difficult to cope up with the rising housing demand. In India, affordable housing in India has just kickstarted and is yet to take shape. The lack of affordable housing in metropolitan cities is evident as the cheaper options are coming up in the peripheral areas that exert pressure on transport infrastructure. Under the Housing For All mission, over 110 million housing units are required while $2 trillion will be invested to fulfil the housing shortage. This is yet to be implemented and has a long way to go.
While housing has gained a prominence in Indian economy only recently, it would be important to address the issues beforehand to tackle the heterogeneous demography and its housing and financial needs.