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World Bank and India signed Agreement for Low income Housing Finance Project

Aug 16, 2013 19:05 IST

The Government of India and the World Bank on 14 August 2013 signed a 100 million US dollars credit agreement aimed at helping low-income households to secure loans to purchase, build or upgrade their dwellings.

The Low Income Housing Finance Project would be implemented by the National Housing Bank (NHB).
 
The credit agreement for the Low Income Housing Finance Project was signed between the Government of India, National Housing Bank (NHB) and World Bank in New Delhi on 14 August 2013.The project aims at reaching a higher proportion of lower income households while maintaining portfolio quality standards.

About the Project

1.The objective of the project is to provide access to sustainable housing finance for low-income households to purchase, build or upgrade their dwellings.
2.The project will support the government’s agenda for financial inclusion by making it easier for low-income households in urban areas to access housing finance.
3.The project will also support financial institutions which target low-income households and build their capacity to scale up sustainable housing finance.
4.This project will allow low-income households to switch from informal finance to longer-term, formal sources for their housing needs.
5.The project funding is a financial intermediary loan for an implementation period of 5 years.
6.The project will be financed by a credit from the International Development Association (IDA), the World Bank’s concessionary lending arm which provides interest-free loans with 25 years to maturity and a grace period of five years.

Comment

India’s urban population is expanding at a rapid pace and is expected to rise to 600 million by 2031, more than double that in 2001.

Housing shortages in India are also acute with more than 90 percent of the shortage being faced by low-income households. In 2012 the urban housing shortage was estimated at 19 million.

In India housing shortages are a result of several challenges facing the housing sector. Current land use policies and building norms restrict the availability of housing and developers tend to refrain from entering the low-income market due to perceived risks associated with buyers who lack access to formal finance.
 
The bulk of the low-income population works in the informal sector, with no documentation of income is also worsening the problem.

Most banks in India do not have the tools or the capacity to assess and manage credit risk for this market. And most non-bank financial institutions lack access to the long-term funding necessary to make housing finance affordable to low income household.

Is this article important for exams ? Yes128 People Agreed
Read more Current Affairs on: Low Income Housing Finance Project , World Bank

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