"Housing finance companies (HFCs) and banks hesitate to serve the low-income market for a variety of reasons such as inability to assess credit worthiness, uncertain cash flows and lower profits," she said while addressing the national convention of the National Real Estate Development Council.
Noting that involvement of banks and HFCs is essential to bridge the huge housing deficit, Selja said the ministry is planning to set up a guarantee fund for removing the fears of banks and HFCs in providing loans to the economically weaker sections (EWS) and the low income groups (LIG) of the society.
"My ministry is in the process of innovating and recommending appropriate risk mitigating instruments to allay the fears of banks/HFCs in extending long term home loans to the poor," she said.
Selja expected that with a hedge fund to cover risk in title instruments, more financial institutions would come forward and would foster the goal of inclusive growth of the downtrodden sections of the society.
The minister pointed out that despite boom in housing finance, "affordable housing remains a distant dream for the Economically Weaker Sections (EWS) and the Low Income Groups (LIG) of our society".
The total urban housing shortage including the backlog and additional requirement would be 26.53 million dwelling units by the end of the 11th Five Year Plan period.
"Ninety-nine per cent of this shortfall would be for Economically Weaker Section (EWS) and the Low-Income Group (LIG) segment, which contributes to squatting and slum formation," she said.
To meet this housing shortage, she said an investment of more than Rs 6 lakh crore is estimated for construction of houses and related infrastructure.
This would require significant contribution from central government, state governments and private stakeholders.