Households with annual income of up to Rs 6 lakh and not having any pucca house, are allowed to avail of interest subsidy through the Credit Linked Subsidy Scheme (CLSS), a component of the PMAY (Urban) to boost affordable housing in urban areas. Households with annual income of up to Rs 6 lakh and not having any pucca house, are allowed to avail of interest subsidy through the Credit Linked Subsidy Scheme (CLSS), a component of the PMAY (Urban) to boost affordable housing in urban areas.

A concerted low-cost housing push by the government through its flagship Padhan Mantri Awas Yojana (PMAY) notwithstanding, the residential real estate sector — a key enabler for the construction and allied industries — is still struggling. For the scheme, which was announced in June 2015 and focussed largely on serving the needs of the economically weaker sections (EWS) and the low-income group (LIG), Prime Minister Narendra Modi’s Saturday announcement that effectively broad-based its scope by doubling the quantum of loan on offer could come as a much-needed fillip.

On Saturday, the government has announced creation of two new middle-income categories under PMAY in urban areas and one scheme for rural areas. As against the initial scheme which provided loans of up to Rs 6 lakh at a subsidised rate of 6.5 per cent, now, housing loans of up to Rs 9 lakh and Rs 12 lakh will now get interest subvention of 4 per cent and 3 per cent, respectively, in 2017. This is expected to cover nearly 65 per cent of the home loan customers of public sector banks (PSBs).

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“If we use a rule of thumb, a person with a Rs 6 lakh annual income is eligible for housing loan of up to Rs 24 lakh. If this is the case, the revised PMAY scheme will be a game changer as around 65 per cent of housing loan of 26 PSBs are in the slab of under Rs 25 lakh,” said State Bank of India chief economic advisor Soumya Kanti Ghosh, in a report on Tuesday.

Households with annual income of up to Rs 6 lakh and not having any pucca house, are allowed to avail of interest subsidy through the Credit Linked Subsidy Scheme (CLSS), a component of the PMAY (Urban) to boost affordable housing in urban areas.

Out of the total outstanding individual housing loans of Rs 4.40 lakh crore given by 26 PSBs in 2014-15, 65 per cent were given to people taking loans up to Rs 25 lakh. With the interest subsidy component rising, these category of people can now take advantage of the interest subsidy.

The new schemes are expected to cost the government Rs 1,000 crore in 2017-18 to support the CLSS, which has seen tepid response so far. According to the government data till November 30, 2016, a total of 15,291 beneficiaries availed of the subsidy amounting to Rs 272.13 crore under the Credit Linked Subsidy Scheme component of Padhan Mantri Awas Yojana .

Gujarat and Maharashtra had the highest number of beneficiaries at 6,572 and 3,357, respectively, to whom total subsidy worth Rs 190 crore was disbursed under the scheme. Along with other key components of the PMAY, the CLSS will be implemented up to March 31, 2022, in all 4,041 statutory towns as per 2011 census. It is estimated that a total of 2 crore loans will be sanctioned over the 7-years.

Another new scheme subsidising interest payment on loans up to Rs 2 lakh for extension of housing is expected to provide another booster. “Loans of up to Rs 2 lakh taken in 2017, for new housing, or extension of housing in rural areas, will receive an interest subvention of 3 per cent. This is an excellent measure which will give major boost to rural housing as only 7 per cent (or Rs 43,156 crore) of housing loans of scheduled commercial banks are from rural areas. Rural housing loans which grew by around 26 per cent in FY15 (2015-16), will increase significantly further due to this measure,” Ghosh said.

Boost for affordable housing

The government’s scheme is likely to provide a big boost as the maximum demand for housing is in the affordable category where the houses are priced anywhere between Rs 20 lakh and Rs 40 lakh, depending upon the city and the location of the housing project. It has been this segment that has essentially witnessed an uptick in the demand over the last 1 year even as the broader market has remained subdued.

A Liases Foras Report released in the first half of 2016 said that as demand came into the segment, developers were also responding to the same and there has been an increasing trend of project launches in the price category between Rs 25 lakh and Rs 50 lakh in these markets.

While big cities may not be directly witnessing the upward trend, head of housing finance companies say that there has been a rise in loan demand for affordable housing in tier-II, tier-III cities and in the cities at the peripheries of large cities such as Hapur, Karnal and Manesar.

“It is this demand that will receive support from the PM’s recent announcement and the overall sector may witness increased off-take,” said the head of a housing finance company who did not wish to be named.

DHFL chief executive officer Harshil Mehta said the government measures will help in addressing housing shortage of 4 crore units over the years.

Who can apply?

The CLSS is available for persons of EWS or LIG category. EWS are defined as households having an annual income up to Rs 3 lakh while LIG are defined as households having an annual income between Rs 3 lakh to 6 lakh. The ownership of houses to be acquired under the scheme has to be in the name of woman or jointly with husband. The carpet area of houses being constructed or enhanced under CLSS should be up to 30 square meters and 60 square meters for EWS and LIG, respectively. States are allowed to relax this criteria with the consent of the beneficiaries. States can also enhance the area while meeting the additional expenditure. Beneficiaries can submit self-certificate or an affidavit as proof of income.

The beneficiary can build a house of larger area, but interest subvention were earlier limited to first Rs 6 lakh only which has now been doubled. The interest subsidy will be available only for loan amounts up to Rs 12 lakh and any additional loans beyond Rs 12 lakh, will be at non-subsidised rate. The subsidy is credited upfront to the loan account of beneficiaries through lending institutions resulting in reduced effective housing loan and equated-monthly instalments.

Revised Budget Estimates: Despite shortfall in earnings, Railways fixes operating ratio at 94 per cent

Even though it grappled with massive shortfall in earnings all year round, Indian Railways (IR) has fixed its operating ratio for this financial year at an optimistic 94 per cent in the Budget’s Revised Estimates (RE) proposal sent to the finance ministry recently. On top of that, the finance ministry has turned down request for any extra financial assistance to the transporter, and most of its zonal railways have projected reduced traffic earnings, leaving IR’s book-keepers with a lot of “balancing act” to do in the last cycle of a separate Rail Budget.

The target for the operating ratio — money spent to earn every rupee; the lower the better — set in the last Rail Budget was 92 per cent. If one goes by the actual figures based on earnings and the projection for the remaining three months, and then also takes into account the expenditure, the real operating ratio could be well above 100 per cent, officials said. The half-yearly operating ratio this year was 114 per cent.

However, sources said the top brass of the ministry refused to approve any operating ratio number that is too far away from the target. The current figure of 94 per cent was, thus, arrived at after much accounting adjustments in the national transporter’s books done before the RE proposal was finalised.

Even after several adjustments, the balancing of the railway books still hinged greatly on a grant of around Rs 8,000 crore from the finance ministry sought for this year, which the latter turned down last week. The balancing act also depended a lot on Railways’ wish list to the ministry, seeking extra infusion of funds.

The wish list included compensation for the losses the transporter incurs on account of social service obligation; the losses it suffers in non-suburban sector of passenger services; sharing of the burden of the Seventh Pay Commission hike in salaries and pensions, and the like — all of which has met with refusal.

Only thing tangible the finance ministry appears to have agreed to so far is to clear arrears of around Rs 2,000 crore that it owed Railways towards losses incurred on strategic lines in the past.

A Gross Budgetary Support of Rs 48,000 crore to Railways has been agreed on even though Railways is still seeking some more. The ministry appears to be of the view that since Railways no longer needs to pay dividend of around Rs 9,000 crore per year to the government, owing to the merger of the Rail Budget into the General Budget, its finances stand already augmented. Apart from Rs 8,000 crore for this year, Railways had sought a similar grant for next year also. The finance has turned down that as well.

In the RE, revenue of around Rs 1.7 lakh crore and expenditure of around Rs 1.2 lakh crore has been firmed up. However, officials in the know said it would have to be really exceptional performance on the part of Railways in the next three months before the fiscal year ends to actually achieve those revenue numbers because most of the zonal railways have projected reduced traffic earnings in their Revised Estimate numbers for the rest of the fiscal year.

“There is a strong possibility that we end up with a shortfall of at least Rs 15,000 crore by the time the actual numbers for this fiscal start coming in,” said a senior Railway ministry official on the condition of anonymity. The expenditure burden, thanks to salaries, pension and the like, will, however, remain more or less the same. There are chances that to make the books look good finally, the funds like pension fund, development fund will see much less appropriation for next year.

CIL may miss 2016 offtake target

The offtake performance of Coal India Ltd (CIL) in the current year up to October 2016 has been 292.16 million tonnes (MT) (provisional), against the target of 331.76 MT, with 88 per cent materialisation. Generally, it is observed that coal production slows down considerably between June and September every year. This trend is evident this year also and the downswing has been greater than previous years due to excessive rains in coal mining areas. The production has picked up from October onwards.

# In addition to the monitoring mechanism available at CIL and Central Electricity Authority (CEA), coal supplies to power utility sector is regularly monitored by an inter-ministerial sub-group of the Infrastructure Constraints Review Committee comprising representatives of the power ministry, the coal ministry and the railway ministry, constituted by the Infrastructure Review Committee of Cabinet Secretariat. This sub-group takes various operational decisions for meeting any contingent situations relating to power sector, including critical coal stock position for power plants.

# Coal is presently supplied from CIL sources under long-term FSAs with a tenure of 20 years wherein coal supply has been assured to the tune of 90 per cent of Annual Contract Quantity (ACQ) for pre-2009 TPPs (TPPs commissioned as on March 31,2009) and 75 per cent of ACQ for post-2009 TPPs (TPPs commissioned/coming up after March 31, 2009).

# In respect of post-2009 TPPs, supply of indigenous coal has been assured to the tune of 65 per cent of ACQ up to 2014-15, 67 per cent in 2015-16 and 75 per cent in 2016-17. The presidential directive issued by the government on July 17, 2013, directed conclusion of FSA in respect of post-2009 TPPs of a 78,535-megawatt capacity which were likely to be commissioned by March 31 2015.

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