In view of the rising property prices, the number of individuals preferring affordable housing priced below Rs 40 lakh has decreased in the last few years. A Consumer Sentiment Survey by Anarock Research in 2018 found that 39% of homebuyers preferred affordable homes. However, this number declined to 13% in 2022.
The reduction in demand for affordable housing has resulted in a decline in affordable housing supply in top 7 cities as developers are now more focussed on mid and premium housing priced between Rs 40 lakh and Rs 1.5 crore.
Also Read: Budget 2023 Income Tax Changes Live Updates
As per the Anarock Research data, the supply share of affordable housing was highest at 40% of over 1.95 lakh units launched that year. In 2022, the share of affordable housing dipped to just 20% of approx. 3.58 lakh launched units.
Data shows that unsold affordable housing stock in the top seven cities is significant – of total 6.30 lakh unsold units in the top 7 cities as of 2022-end, affordable housing comprised 27%.
Affordable Housing – Declining Supply Share
|Total Supply (Units)||1,95,300||2,36,560||1,27,960||2,36,700||3,57,650|
|% Share of Affordable Housing||40%||40%||30%||26%||20%|
How affordable housing can become attractive again
Real estate experts suggest that Budget 2023-24 should revise affordable housing price bandwidths to make it attractive again. Buyers in the affordable housing segment get the benefit of lower (1%) GST without ITC and other subsidies.
“One possible way the Budget can intervene is by revising the price bandwidths for homes that qualify as affordable housing, as per the specific market dynamics of different cities,” says Anuj Puri, Chairman, Anarock Group.
“The size of units that qualify for various affordable housing benefits is currently 60 sq. m. on carpet area. While this is appropriate, the uniform price band of up to INR 45 lakh for affordable housing is not aligned with the market realities of most major cities,” he adds.
Also Read: Tax-free pension plans to higher Section 80D limit: 7 key expectations of Insurance Sector from Budget 2023
Puri further says that Rs 45 lakh or below is far too low in a city like Mumbai, where it should be increased to Rs 85 lakh or more. In other major cities, the price band should be increased to Rs 60-65 lakh. “This would result in more homes qualifying as affordable housing, enabling many more homebuyers to avail benefits such as reduced GST at 1% without ITC, and other government subsidies,” says Puri.
“More tax sops for housing end-users and investors for affordable housing would also boost demand. The current tax rebate of INR 2 lakh on housing loan interest under Section 24 of the Income Tax Act must be increased to at least INR 5 lakh. This will add momentum to housing demand, particularly in the cost-sensitive affordable segment,” he adds.