Affordable housing to give a leg up to ailing real estate

Published: November 21, 2019 2:23:55 PM

A total of 10 million PMAY units have to be delivered by 2020 itself, thus making affordable housing a dominant segment in the coming years.

real estate, affordable housing, real estate in India, Pradhan Mantri Awas Yojna, PMAY, Public Private Partnership, NCLT, homebuyersMore and more renowned realty majors are entering the affordable housing segment as demand for affordable homes is on the rise.

With the real estate sector in India sailing in troubled water for quite a long time and projects not getting delivered on time, a majority of buyers had lost their trust in the sector. But of late, with affordable housing coming into the fray and a slew of measures taken by the Government of India to fish out the sector from this mess, investors have started to regain their confidence. Also, more and more renowned realty majors are entering the affordable housing segment as demand for affordable homes is on the rise.

In fact, there are a number of factors that make affordable housing the future of the realty sector. The most important factor being the Government of India itself pushing for the affordable housing segment. The Union Budget had focused on reviving the real estate sector, especially the affordable housing segment. Great emphasis has been laid on the affordable housing segment as around 1.5 crore affordable homes have been built in the last five years under the Pradhan Mantri Awas Yojna (PMAY) and 1.95 crore are being further built as part of Phase-II. To further increase the demand in the residential market, the Finance Minister also announced additional deduction of up to Rs 1.5 lakh for interest paid on housing loans borrowed up to March 31, 2020 for purchase of affordable homes.

The FM also recently announced an Alternative Investment Fund (AIF) of Rs 25,000 for the stalled Affordable and Middle Income houses. More importantly, several NPA projects and ones facing bankruptcy proceedings under NCLT shall also be included provided they are not referred for liquidation. This move will include more stalled projects into the eligibility criteria and provide relief to already aggrieved homebuyers. These steps will not only benefit the homebuyers but also aid the affordable housing sector. A large chunk of homebuyers have shifted their focus on affordable housing as investing in premier units does not seem secure. Delay in delivery of projects, incidents related to quality issues and economic slowdown have affected the real estate sector in a big way, but at the same time these factors have increased the demand for affordable homes.

Apart from the initiatives taken by the government to boost the affordable housing sector, another important factor which increases the demand for affordable homes is India’s population. As we know, India is the second largest populated country and a major part of the population belongs to the lower and middle class income group and they all aspire to buy a home in a bigger city. So, looking at their budget, the demand for affordable homes will remain robust in the coming times. According to a recent report, a total of 10 million PMAY units have to be delivered by 2020 itself, thus making affordable housing a dominant segment in the coming years.

Premium homes in Tier-1 cities have become largely unaffordable, hence increasing the demand for affordable homes. Also, reports show that there will be a significant rise in the urban population, which is expected to grow to 590 million by 2030 at a compounded annual growth rate of 2.4% between 2010 and 2030, thus encouraging more and more developers to come up with affordable housing projects.

The Public Private Partnership (PPP) model introduced by the government for affordable homes has also provided additional significance to this segment. Collaborations between public and private sectors not only generate resources, but also increase the trust factor of the buyers due to the involvement of government bodies. All these things are giving a boost to the affordable housing market. Thus, the future of affordable housing looks very promising and we expect it to revive the ailing real estate sector in the coming years.

(By Rajat Goel, Joint Managing Director, MRG World)

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1SEBI move to double minimum PMS investment limit aimed at protecting interest of retail investors
2PPF Vs NPS Vs MF: Where and how much to invest to accumulate adequate retirement corpus?
3How to reduce the EMI of your home loan