The government has no immediate plan to reclassify the “affordable housing” segment, which is encouraged with interest subvention funded out of budget, a senior official from the ministry of housing and urban affairs (MoHUA) told FE.
“It’s possible to own a house within Rs 45-lakh bracket in nearly all the cities except Mumbai. We are not re-looking the affordable housing definition as of now,” said the oficial.
Reports had suggested that the MoHUA has sent a proposal to the finance ministry to increase the affordable housing threshold – from Rs 45 lakh currently to Rs 75 lakh. To be sure, the government defines affordable housing as a residential unit with a carpet area of 60 square metres in metros and value below Rs 45 lakh. In non-metros, the corresponding area is 90 square metres but the value remains the same.
Experts said that construction cost alone is pushing up the prices of affordable houses significantly. For instance, the minimum construction cost of a residential building in metros is Rs 3,000 per square feet. It would take over Rs 19 lakh to build a 645 sq ft (or 60 sq metres) apartment. The land cost, which is a bigger chunk of the overall cost, is over and above it.
“The actual threshold has moved up to over Rs 75 lakh in most cities. The industry has been asking for the government to reformulate the PMAY-U so that more people can benefit from the scheme. In addition, the government needs to incentivise people through tax sops,” said Ravi Shankar Singh, managing director (residential transaction services) at Colliers India.
Under the PM Awas Yojana (Urban), the largest scheme to promote affordable housing for the urban poor and slum dwellers, the households can benefit from the concessional home loan rates (6.5% for upto 20 years) and financial assistance of Rs 1-2.67 lakh per house (in the form of construction cost, etc) from the central government. The scheme, which comes under MoHUA, has about 11.86 million houses sanctioned so far at a total investment of Rs 8.11 trillion.
But despite the financial aid from the government, PMAY-U might be falling short of its intended purpose. “Many people are not getting the benefits of this scheme because their house costs more than the threshold which is why there’s a need to revisit the definition, and classify the affordable category for each city,” said Singh.
Under the PM Awas Yojana-Gramin launched in 2016, fnancial Assistance of Rs 1,20,000 per unit for plain areas; and ₹ 1,30,000 per unit for hilly areas, difficult areas are provided. A beneficiary can avail of institutional loan of up to Rs 70,000 at 3% lower interest rate, to build a permanent house. The maximum principal amount for which subsidy can be sought is Rs 2,00,000.