Affordable housing to continue to flourish in 2020

January 15, 2020 2:29 PM

The government has set an ambitious goal of providing ‘Housing for All by 2022’. It is expected that it would continue to provide further impetus to affordable housing.

Affordable housing, Affordable housing in 2020, real estate, real estate in India, PPP in Affordable housing , CLSS, Indian economyA total of 65,799 housing units were sold during the quarter ending September and nearly half the units that were sold during the quarter are affordable homes.

It is down, but certainly not out. Amid the challenging global economic environment, the stellar growth of Indian economy has also come under duress. The GDP growth during the first two quarters of the current financial has fallen to 5% and 4.5%, respectively. Yet, the Indian economy continues to remain one of the fastest-growing economies in the world.

To address the growth concerns, the government has announced some measures like reduction in the corporate tax rate to 22% from 30% earlier and upfront recapitalisation of public sector banks, among others.

One of the major reasons behind the state of the economy not being very conductive is the state of the realty sector, which has remained under pressure for a couple of years now. According to Realty Decoded, a quarterly analysis of India’s nine key property markets by PropTiger DataLabs, both home sales and launches have fallen in the July-September quarter. While the new project launches in the country declined by 45%, home sales reduced by 25% as compared to the corresponding quarter of the last financial year.

Affordable Housing – the saviour

However, there are some silver linings. A total of 65,799 units were sold during the quarter ending September and nearly half the units that were sold during the quarter are affordable homes. At 21,985, the highest number of units was sold in the Mumbai market, followed by the sale of 13,644 homes in Pune.

It is pertinent to mention here that in the Budget 2019-20, the government had announced additional tax deduction of Rs 1.5 lakh for the first-time homebuyers subject to house prices remaining up to Rs 45 lakh. This has also helped the cause of ‘Affordable Housing’.

Affordable Housing will continue to rule

The government has set an ambitious goal of providing ‘Housing for All by 2022’. It is expected that the government would continue to provide further impetus to affordable housing. Also, as the migration of people belonging to lower income from rural and semi-urban areas to urban areas continues unabated, the demand for affordable housing is likely to remain high.

According to some estimates, this shortage continues to be in excess of 10 million houses in (urban areas).

PPP in Affordable housing to gain momentum

With the fiscal deficit already having crossed the budgeted level, it is extremely difficult for the government to meet its ambitious target on its own. In view of this, it is imperative that the government encourages private developers to enter the affordable housing arena.

Already, a large number of developers have made inroads into this segment and are finding this segment lucrative. On its part, the government announced a comprehensive public-private partnership (PPP) policy in September 2017 wherein it introduced two Public Private Partnership models for private investments in affordable housing on private lands. Under one model, the government extends a central assistance of about Rs 2.67 lakh per house as interest subsidy under the Credit Linked Subsidy Component (CLSS) on bank loans as upfront payment component of Pradhan Mantri Awas yojana.

Under the second option, Central assistance of Rs 1.50 lakh per house is provided, in case the beneficiaries do not intend to take bank loans.

State Government’s policy may act as an enabler

As land is a state subject, many state governments, including that of Haryana, have also introduced their own policy for affordable housing. The policy is helping in providing affordable plots and houses to a vast section of population.

Usage of technology to gain pace

Technology is playing a vital role in not only speedier construction, but also in lowering of cost. With many new technologies coming up and several start-ups entering the construction technology arena, the usage of technology is going to gather pace further in the construction industry.

The expectations

Until 2022 and perhaps even beyond, the affordable housing space will continue to be key focus of the realty sector. Policy impetus coupled with various affordable housing schemes by state governments as well as active participation of private sector is likely to make ‘Housing for All’ a commercially-viable opportunity.

(By Parveen Aggrawal, Founder & Chairman, Signature Sattva)

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