The impact of a housing-linked contract savings scheme on households' holdings of financial assets in India

Abstract

This paper uses a carefully matched sample of Indian renter households who are participants in a savings scheme explicitly linked to obtaining a mortgage and a sample of similar households who are not participants to estimate the impact of participation on the share of assets participants hold in financial form. Participants are found to hold significantly more of their assets in this form; over a standard savings period the incremental holdings in financial assets are equivalent to the amount saved in the contract savings scheme. The estimates support the contention that participants do not merely shift the instruments in which financial assets are held in saving for home purchase but rather make a reallocation in favor of financial assets — monies that are available for investment anywhere in the economy during the savings period.