Relaxing Lending Norms Could Boost Affordable Housing, Says NITI Aayog

The National Institution for Transforming India (NITI) Aayog in its newly released document Strategy for New India @ 75 has suggested that the government should consider adding a sub-category of affordable housing to the housing category under Priority Sector Lending (PSL) to ensure the sector gets the much-needed boost. "To ensure greater access for the poor to institutional finance, the Department of Financial Services should consider a subcategory under priority sector lending (PSL) for affordable houses," the NITI Aayog said on December 19.

Certain sectors in the economy, including housing, that work for the larger interest of the country are eligible to get funds under the PSL category. To such sectors, banks have to extend a certain portion of their adjusted net credit as loans.

Earlier in June this year, the Reserve Bank of India said that housing loans of up to Rs 35 lakh would qualify for benefits of the PSL in metropolitan cities. For other centres, the cap was raised from Rs 20 lakh to Rs 25 lakh. The RBI also stated that the home against which loan is being taken should not cost more than Rs 45 lakh in metros and Rs 30 lakh in other cities.

The NITI Aayog has also suggested a relaxation of eligibility conditions for bank loans. These include raising the cap of Rs 10 lakh given to the developer as the construction cost for each home under the Pradhan Mantri Awas Yojana (PMAY). The government think-tank has also suggested the Rs 2-lakh threshold for maintenance of the house in centres other than the metropolitan cities also be raised.

It also said government projects could focus on the life-cycle-cost approach to build such homes rather than the cost-per-square-foot approach to bring down costs. To ensure that there is enough land to take up affordable housing projects, the Aayog has suggested land lying idle with public sector undertakings be provided for taking up such projects.