Affordable Housing: Need to overcome various challenges to realize the Housing for All mission

Published: August 31, 2018 3:22 PM

Having remained neglected for a long time, affordable housing has suddenly become a promising sector that no developer can afford to ignore.

real estate, real estate in India, affordable housing, budget homes, rera, gst, housing for all by 2022 Affordable housing is finally losing its ‘down market’ label and turning into a serious and respectable segment of the real estate sector.

With Prime Minister Narendra Modi pushing for ‘Housing for All by 2022’ in the country, affordable housing is witnessing heightened activity with new as well as established developers both drawing up mega plans to either enter the segment or enlarge their portfolio of this real estate industry segment.

Having remained neglected for a long time, affordable housing has suddenly become a promising sector that no developer can afford to ignore. Affordable houses, residential units that cost up to Rs 25 lakh, account for 20 per cent of all residential sales in the country and this percentage is expected to grow in the coming years as this real estate segment has also emerged as a preferred format of homes that a large section of the population can opt for.

Given the fact that affordable homes can fall within the reach of a large number of buyers, this format can be the solution for housing most families in the country. The government has rightly been relaxing the norms for projects that fall under the affordable housing category. These relaxations are further helping the developers to price the inventory which is even more affordable for the masses. A recent report states that the share of affordable houses in the property market has gone up from 8 percent in FY16 to 21 percent in the current financial year due to the affordable segment now being backed by the regulatory reforms.

With regulatory and taxation policies in the form of Real Estate (Regulation & Development) Act, 2016, and Goods & Services Tax (GST), along with the Credit Linked Subsidy Scheme (CLSS) in place, property development environment has now become more stable.

Another noteworthy thing is that affordable housing is finally losing its ‘down market’ label and turning into a serious and respectable segment of the real estate sector – which is a win-win for both the buyers and developers.

In a bid to give a further boost to affordable housing, the government is working on a multi-pronged strategy. As a part of this strategy, it is working to help property developers contain the cost of affordable houses by reducing the approval time for projects. The Central government is also working with states to see that they take to online working, in order to ensure transparency and accountability, with corruption-free environment, leading to faster approvals. But the much-needed single window system, to check project delays and cost over-runs, is still eluding the sector.

True, RERA has given a boost to the housing sector by checking diversion of funds and ensuring timely completion of projects to boost supply. But various challenges still remain on the ground, especially considering the fact that at the current pace of construction, even the revised target of building 12 million urban homes under ‘Housing for All’ by 2022 looks a tall order. Banks are reluctant to lend to developers while sourcing capital from NBFCs and PE funds is costlier, especially for affordable housing where margins are thin. Therefore, there is a need to come up with a policy for subsidized funding to developers of affordable housing, along with a provision to fund land which forms a major component of project cost. Lowering stamp duty to improve affordability will further help give boost to affordable housing and realize the mission of ‘Housing for All’.

(By Pradeep Aggarwal, Co-founder & Chairman, Signature Global, and Chairman, National Council on Affordable Housing, ASSOCHAM)

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