Between Financial Regulation and Innovation: the Case of Housing and Infrastructure Finance in India

The 2008 financial crisis has highlighted the dangers of certain financial innovations that took place in the context of generalized deregulation. In India, as in other emerging countries, where financial markets are not very mature, the authorities could be tempted, by way of response, to take measures to prevent the appearance of innovative financial products with real utility. This is illustrated by the real estate market in India, which experienced a slowdown in 2008 because of the difficulties encountered by the principal financiers, commercial banks and the Housing Finance Corporation. In view of the great need for infrastructure and housing in India, the author recommends upgrading the securitization of real estate credits, which for him is an alternative to bank financing if it is accompanied by appropriate regulations and monitoring.