Recent house financing developments in India make a case for looking beyond a country’s borders when looking for best practices for financing and constructing affordable housing.
Risky lending practices, buying, selling, packaging and repackaging sub-prime mortgages cratered the American housing market and triggered a depression a short ten years ago. The memory is etched in the minds of the tens of millions of Americans were affected by this disaster, and the housing market, both rental and ownership have far from recovered from this blow.
India’s housing industry is under pressure to deliver an enormous quantity of housing to make good on a promise of “housing for all” by 2022. But instead of a financial infrastructure pulling together to achieve a most admirable dream, there are signs of trouble in the marketplace.
With lenders expressing concern about defaults on housing loans, employment stability and job loss are identified as important contributing factors.
Amazingly, no mention is made of the fact that the ‘informal sector’ still comprises 75% of India’s economy. To use a term common in the western world, 75% of the economy is ‘under the table’, disconnected from taxes, minimum salaries, working condition regulations, employee rights, pensions and so forth. How employment stability and job loss can be considered significant in house financing under these conditions is a mystery, even as India works diligently and with success to lower the size of the informal sector.
For more on danger signs in the Indian financial world read in money control: Risky lending practices, possible job losses may cause home loan defaults: HDFC
