1. Affordable housing: Some important facts you must know

Affordable housing: Some important facts you must know

The demand for affordable housing has gained substantial momentum in the recent past and with the Reserve Bank of India lowering its minimum risk weight on home loans, banks are now able to extend more funds for affordable housing projects.

Updated: June 5, 2017 2:09 PM
The demand for affordable housing has gained substantial momentum in the recent past and with the Reserve Bank of India lowering its minimum risk weight on home loans, banks are now able to extend more funds for affordable housing projects.

By Manish Sinha

Statistics reveal that India leads the housing shortage with a shortage of 20-25 million houses. However, the Modi government’s mission to achieve ‘Housing for All by 2022’ has given the affordable housing sector a much deserved share of limelight. Added to this, the demand for affordable housing has gained substantial momentum in the recent past and with the Reserve Bank of India lowering its minimum risk weight on home loans, banks are now able to extend more funds for affordable housing projects.

Here are some important facts you should know about affordable housing:

# Infrastructure status to affordable housing
* Union Budget 2017-18 has granted “Infrastructure” status to affordable housing and this step is aligned with the government’s agenda of ‘Housing for All by 2022’. This status reduces the cost of borrowing for real estate developers, provides easy access to finance and spur investments, opening of external commercial borrowing (ECB) route and taxation benefits for the developers.

# Increase in participation from private players
* So far, affordable housing segment had seen limited participation from private developers despite high demand. An increase in budget allocation under PMAY from Rs15,000 cr to 23,000 cr, revising the size of carpet for low income group houses, boost in home loan are likely to result in increased participation from private players.
* Profit-linked exemption along with the infrastructure status for affordable housing will push developers to undertake more affordable housing projects, thus increasing private player’s participation in the sector.

# Easy availability of loans and income tax deduction for buyers
* With the announcement of interest subvention of 4% and 3% on loans up Rs 9 lakh and Rs12 lakh, respectively, there is boost in the home buyer’s confidence. The proposed deduction of the income tax rate to 5% for taxpayers having income less than Rs.5 lakh per annum will increase the disposable income of the common man and this will in turn raise spending power and increase investment in the affordable segment.

# Major deals
* About Rs 7,296 crore has been allocated for two central schemes – Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and ‘Smart Cities’ Mission with focus on provision of clean drinking water, setting up of sanitation and solid waste management systems, efficient mobility and public transportation and affordable housing.
* Tata Value Homes, a 100 per cent subsidiary of Tata Housing Development Company, has raised $25 million, i.e. Rs 168 crore for construction of affordable housing projects through CDC, UK’s Development Finance Institution (DFI) and IFC, a member of the World Bank group.

# Carpet area and project completion time
* For affordable housing purpose instead of the built up area of 30 and 60 sqm, the carpet area of 30 and 60 sqm will be counted. The 30 sqm limit will apply only in case of municipal limits of 4 metropolitan cities while for the rest of the country including the peripheral areas of metros, limit of 60 sqm will apply.
* The government has extended the time of completion of such projects from 3 years to 5 years.

# Demand for affordable housing units on property portals
* There are two common trends seen for buying and moving in to a new house are: movement of people and upgrade in similar locality. These trends are resulting in property portals witnessing high demand for affordable housing units.
* The price brackets Rs 0-30 lakh and Rs 30-60 lakh are the most preferred ones in the country because of private sector employees who are in search of affordable housing units which offer decent amenities rather than luxury and ultra-luxury properties.

# Advantages for woman home buyers
* According to the government’s Housing for All Mission, women should be either co-owners or sole owners of affordable houses. This is to empower women from low-income households. Also, compared to their male counterparts, women are entitled to lower rates of interest on home loans.

(The author is Head of QuikrHomes)

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