Middle-class housing deserves increased attention, according to Deepak Parekh, as stated exclusively.
Deepak Parekh, the renowned figure in India's financial sector and former chairman of HDFC Bank, recently emphasised the need for a greater focus on housing for the middle-class segment. At the FE Modern BFSI Summit, he spoke about the urgent need to increase the supply of affordable housing, which has been drying up despite ongoing demand.
Parekh believes that the future of housing lies in understanding customer needs, seizing the first mover advantage, and building resilience and scale. In his view, the housing market in India has become skewed towards premium and luxury segments, leaving the middle-income and affordable housing sectors undersupplied. By 2030, India's loosely defined middle-class cohort is expected to represent 750 million people, presenting a significant opportunity.
One of the strategies proposed by Parekh to boost middle-class housing in India is the reduction of development premiums to lower costs. Based on recommendations from the committee led by him, the Maharashtra government is considering a significant reduction (up to 50%) in various development premiums imposed on real estate projects in Mumbai. These premiums include charges on Floor Space Index (FSI), staircases, lifts, and lobbies, which are notably higher than in other major Indian cities. Reducing these premiums aims to lower developers’ costs, increase their working capital, and consequently reduce housing prices for end buyers in the middle-income segment.
Another key point is the financial support and regulation for Non-Banking Financial Companies (NBFCs). Parekh highlights the importance of banking support to NBFCs, which play a critical role in financing affordable and mid-income housing projects. Maintaining regulatory prudence, rebuilding trust, and ensuring better financing options for NBFCs can help revive demand and supply in the middle-class housing space.
Incentives to accelerate affordable homeownership are also a crucial part of Parekh's strategy. He acknowledges that incentives can be a powerful tool to make affordable housing more accessible to the middle class. While specifics are not detailed, this indicates support for government or policy-driven incentives to boost this sector.
Parekh expects the second half of the current financial year to be less eventful and more productive. He also expects banking support to non-bank financial companies to improve, which could help revive the middle-class housing market. However, he also stresses that NBFCs' growth cannot come at the cost of procedure.
Overall, Deepak Parekh advocates for a multi-pronged approach combining rationalization of regulatory costs, improved financial backing especially via NBFCs, focused supply-side efforts on middle-income housing, and incentive schemes to revive and sustain affordable housing tailored for the middle class in India.
- Deepak Parekh, a prominent figure in India's financial sector, has underscored the importance of focusing on housing for the middle-class segment, emphasizing the need to increase the supply of affordable housing.
- Parekh suggests reducing development premiums as a strategy to boost middle-class housing in India, with the Maharashtra government considering a significant reduction in premiums imposed on real estate projects in Mumbai.
- Besides this, Parekh highlights the significance of financial support and suitable regulation for Non-Banking Financial Companies (NBFCs), crucial contributors to the financing of affordable and mid-income housing projects.
- Incentives to accelerate affordable homeownership are also a crucial part of Parekh's strategy, with him advocating for government or policy-driven incentives to support the middle-class housing sector.
- Parekh expects the increase in banking support to non-bank financial companies and the reduction of development premiums to help revive the middle-class housing market in the second half of the current financial year.
- Overall, Parekh advocates for a comprehensive approach that includes rationalization of regulatory costs, improved financial backing, focused supply-side efforts on middle-income housing, and incentive schemes to support affordable housing for the middle class in India.
