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Spread of Retail Banking

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Spread of Retail Banking - Housing Finance


Module: 3A - Bank Credit - The New Focus - Housing Finance
Table of Contents

  1. Spread of Retail Banking - Housing Finance

  2. Housing Projects- Financial Institutions - Structure & Role of Housing & Urban Development Corporation

  3. Housing Projects- Financial Institutions - Structure & Role of National Housing Bank (NHB)

  4. Housing Projects- Financial Institutions - Structure & Role of Housing Development Finance Corporation(HDFC)

  5. ADB Helps Provide Low-Income Housing in India

  6. Housing Finance - Role of Banks

  7. Housing Finance - Role of NGOs

  8. SEWA Bank: Housing Finance in India

  1. Housing Projects - NABARD Refinance For Rural Housing Activity

  2. Housing Projects - Grassroot Level Intervention for Cost-effective Housing

  3. Housing Projects - Slum Clearance - National Slum Policy

  4. Housing Projects - Slum Clearance - Part: 2

  5. Housing Projects - Slum Clearance - Part: 3

Other Modules under Project 'Banking Theory & Practice'

  1. Module: 1 - Indian Banks - Structure & Evolution

  2. Module: 2 - Reserve Bank of India - Structure & Functions

  3. Module: 3 - Bank Credit - The New Focus

Amongst the types of advances under Retail Banking housing finance has become the best preferred choice for all banks and financing institutions. In cities and urban area the middle income groups are incurring heavier expenditure for securing a decent rented accommodation, generally above Rs.5000/- per month. It has turned to be more prudent for them to secure a housing loan and go in for purchase of a flat or to construct a small house. The saving in rent partly covers the repayment burden. However housing problem is inherent in all sections of society, the middle-income, low income and the weaker sections, the urban as well as the rural. The solution to the problem is being attended by the Government on fast track and supplemented by efforts by the banks and NGOs. The Banks have already been financing weaker sector and low-income housing schemes for over two decades under priority sector advances. Banks were also lending low interest housing loans to their employees. The new product middle income housing finance on a wider scale is a recent innovation under the segment retail banking.

It is relevant in this context to study the assessment and policy approach of Government of India to this chronic problem of housing shortage.

Housing Problem - its Severe Shortage & Steps by Government to Effect A Solution

"Against the milieu of rapid urbanisation and a changing socio-economic scenario, the demand for housing has grown explosively. The importance of the housing sector in the economy can be illustrated by a few key statistics. According to the National Building Organisation (NBO), the total demand for housing is estimated at 2 million units per year and the total housing shortfall is estimated to be 19.4 million units, of which 12.76 million units is from rural areas and 6.64 million units from urban areas. The housing industry is the second largest employment generator in the country. It is estimated that the budgeted 2 million units would lead to the creation of an additional 10 million man-years of direct employment and another 15 million man-years of indirect employment.

"Having identified housing as a priority area in the Ninth Five Year Plan (1997-2002), the National Housing Policy has envisaged an investment target of Rs. 1,500 billion for this sector. In order to achieve this investment target, the Government needs to make low cost funds easily available and enforce legal and regulatory reforms."
[Source Website of Housing Finance & Development Corportion]

Role of Government - Ministry of Urban Development & Poverty Alleviation

In the federal structure of the Indian polity, the matters pertaining to the housing and urban development have been assigned by the Constitution of India to the State Governments. The Constitutions (74th Amendment) Act have further delegated many of these functions to the urban local bodies. The constitutional and legal authority of the Govt. of India is limited only to Delhi and other Union Territories and to the subject which State Legislatures authorise the Union Parliament to legislate.

However, the provisions of the Constitution notwithstanding, the Govt. of India plays a much more important role and exercise a larger influence to shape the policies and programmes of the country as a whole. The national policy issues are decided by the Govt. of India which also allocates resources to the State Governments through various Centrally Sponsored schemes, provides finances through national financial institutions and supports various external assistance programmes for housing and urban development in the country as a whole. Policies and programme contents are decided at the time of formulation of Five Year Plans. The indirect effect of the fiscal, economic and industrial location decisions of the Govt. of India exercise a far more dominant influence on the pattern of urbanisation and real estate investment in the country.

The Ministry of Urban Development & Poverty Alleviation is the apex authority of Government of India at the national level to formulate policies, sponsor and support programme, coordinate the activities of various Central Ministries, State Governments and other nodal authorities and monitor the programmes concerning all the issues of urban development and housing in the country.

The Ministry was constituted on 13th May, 1952 when it was known as the Ministry of Works, Housing & Supply. Subsequently it was renamed as Ministry of Works & Housing when a separate Ministry of Supply came up. The name of the Ministry was changed to Ministry of Urban Development in September, 1985 in recognition of the importance of urban issues. With the creation of a separate Department of Urban Employment & Poverty Alleviation on 8th March, 1995, the Ministry came to be known as the Ministry of Urban Affairs & Employment. The Ministry had two Departments: Department of Urban Development & Department of Urban Employment & Poverty Alleviation. The two Departments were again merged on 9th April, 1999 and in consequence thereto, the name has also been restored to " The Ministry of Urban Development." This Ministry was bifurcated into two Ministries viz. (i) "Ministry of Urban Development" and (ii) "Ministry of Urban Employment and Poverty Alleviation" with effect from 16.10.1999. These two Ministries were again merged into one Ministry on 27.5.2000 and named as "Ministry of Urban Development and Poverty Alleviation" with two Departments. They are (i) Department of Urban Development and (ii) Department of Urban Employment and Poverty Alleviation.
[Source: Website of Ministry of Urban Development & Poverty Alleviation]


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