How the accumulation of debt during the Covid-19 pandemic is hurting India’s low-income households
Household-debt-to-GDP ratio increased to 37.1% in the second quarter of 2020, The debt levels of daily wage workers around the country have increased, surveys show. | Punit Paranjpe/ AFP
Six years ago, 24-year-old Munna Kumar Singh and his family migrated to Delhi from a small town in Bihar, where he worked in a denim factory in the city’s Udyog Vihar for a monthly salary of Rs 9,000. He is the sole breadwinner in the family of four. He also tries to send a small remittance to those at home in Bihar. When he lost his job with last year’s lockdown to curtain the spread of Covid-19, Singh struggled to make ends meet. He ended up borrowing extensively from informal channels. He is now over Rs 50,000 in debt with no stable income to repay his loans.
Express News Service
Indian households love real-estate. In India, the average family holds 77 per cent of its total assets in real estate, according to a July 2017 RBI Household Finance Committee Survey. These include residential buildings, buildings used for farm and non-farm activities, construction for recreational facilities, and land. Since 2014, the Securities and Exchange Board of India (SEBI) has also opened up commercial real estate for investment too.
In urban areas, many individuals often own one house and buy another one as an investment. They rent it out to generate a second income. Similarly, many wealthy people in India purchase commercial offices or shops, and lease them to businesses. However, managing a real estate portfolio is a challenge. There is a lot of physical paper that has to move around if you have to lease your premises. You have to be personally involved in signing the registration for rent and purchase agreements.