"Be like a postage
stamp. Stick to one thing until you get there."
—Josh Billings (American,
1818-1885)
Word for the day
Velitation (n)
A minor dispute or contest.
Malice towards none
Heard a senior socialist
leader from UP claiming — "Now only Rahul Gandhi stands between Modi and
defeat in 2019"!
First random thought this morning
After terrorism, now rapes in India also have a distinct religious
and caste identities. Rapists are identified as Hindu, Muslim, Christian, Saint
Maulavi, Pastor etc. and victims (or as fashionably called survivors now a
days) are identified as SC/ST, Dalit, North Eastern, etc.
The two pillars of democracy (Politicians and Media) are surely
and fast degenerating. The confidence in the third support pillar (Judiciary)
is also at its Nadir, with the voices of severe criticism coming from within.
It is for the Executive now to take all the burden on itself and save country
from slithering into the world of chaos.
Affordability of affordable housing
Across the world, housing is one of the key drivers of economic
growth. In the high growth phase of Indian economy between 2004-2009, housing
did play a major role. Nonetheless, affordability has remained a key constraint
in growth of housing sector.
Many analysts, including CLAS Greed & Fear, have suggested in
their recent reports that affordability factor may be coming back to 2003-04
levels in Indian housing market.
Latest issue of Greed & Fear reads that the best stories to
invest in in India remain the affordable housing story and the dramatic, albeit
healthy, consolidation of the residential property market triggered by the
“double whammy” of the Real Estate Regulation Act (RERA) (implemented from May
2017) and demonetisation."
As per the report, the residential property market in India has
begun to pick up, "after years of oversupply, helped by dramatically
improved affordability." As per CLSA estimates, the mortgage payment to
post-tax income ratio has declined from 56% in FY07 to an estimated 31% in FY18,
the lowest level since FY04."
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There is no doubt that compliance led disruptions, and raw
material constraints (especially sand) have resulted in lower supply at a time
when the government is pushing the affordable housing segment investment hard.
On aggregate basis therefore the net new sales are outpacing net new supply
(including new launches and delivery), and lower inventory of built up and
under construction houses.
It would however be totally wrong to conclude that housing sector
has turned around and is ready to play a leadership role in faster and sustainable economic growth.
The affordability statistics presented by equity analysts is based
on the data for actual borrowers from the banks. This data though useful may
not be (a) a good representative sample of the economy; and (b) may not address
the issue of affordability holistically.
The banks and housing finance companies have materially tightened
the lending norms in past few years. They are now seeking much more margin of
safety from borrowers. Lower mortgage payment to post-tax income ration may to
some extent may be influenced by these stringent criteria.
Moreover, interest subsidy by the government for lower price
houses may also be aiding to lower ratio, as interest subvention reduces the
mortgage payment for individual borrowers.
But the large issue is the notion of affordability itself.
Measuring affordability only in terms of capacity to pay mortgage
is structurally flawed.
A housing unit built 50kms from the city center, with negligible
social infrastructure in the vicinity remains mostly unaffordable for the
intended beneficiaries as the family has to travel long distances for job,
schooling, health services etc.
Most of the affordable housing projects so far have failed to
address the issue of affordability in a holistic manner. (Though in recent
times, government has indicated that they mat redevelop government, port and
railways land within the cities for affordable housing purposes, not much
progress could be seen so far on the ground.)
Lower mortgage payments mean nothing if the house owner has to
spend significantly higher on travel and other social services.
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