Good news for homebuyers, particularly those living in Tier II and Tier III cities. In a bid to give a boost to affordable housing as well as the construction sector, the Modi government has increased the carpet area for houses eligible for subsidy under the Credit Linked Subsidy Scheme (CLSS) for the middle income group (MIG) under the Pradhan Mantri Awas Yojana (Urban). As per the revised norms, MIG-I category home buyers with household income between Rs 6 lakh and Rs 12 lakh are now eligible for a subsidy for homes up to carpet area of 160 sq. m. from the earlier 120 sq. m. Similarly, MIG-II category home buyers with household income between Rs 12 lakh and Rs 18 lakh are also eligible for a subsidy for homes with a carpet area of up to 200 sq. m. from the earlier 150 sq. m.
Industry experts say that the housing ministry’s decision to tweak the eligibility criteria for MIG-I and MIG-II home buyers for houses eligible for interest benefit under PMAY is a phenomenal move to boost sales of large-sized apartments.
“This change will have a significant impact on home sales in tier II and tier III cities where the land costs and, therefore, capital values of properties are low and larger apartments are within the reach of such buyers. The timing of this increase in carpet area eligibility norms is perfect, as the RBI recently decided to revise the housing loan limits for Priority Sector Lending (PSL). The eligibility under PSL has been revised from Rs 20 lakh to Rs 25 lakh in cities other than metros,” says Anuj Puri, Chairman, ANAROCK Property Consultants.
Aashish Agarwal, Senior Director-Valuation & Advisory Services, Colliers International India, says, “The decision to increase the carpet area for interest benefit under the Credit Linked Subsidy Scheme is yet another step in the direction of expanding the beneficiary base for government schemes to promote the housing sector. Households with income within the MIG-I (Rs 6-12 lakh) and MIG-II (Rs 12 – 18 lakh) categories would have missed out on the subsidy, if they purchased apartments larger than the previous eligibility cap of 120 and 150 sqm, respectively, which is not uncommon for large families as well as people living in Tier II and Tier III cities, given the product configurations on offer in some of these markets. In addition, the lower interest outflow will encourage people living in rented apartments to consider buying their own home and provide much-needed sales momentum to builders across a wider range of their product offerings.”
In fact, MIG-I and MIG-II are the segments that needed maximum government support to access housing within their budget, and the move will allow inclusion of a wider geographic and demographic pool of buyers across the country.
“The central bank and the housing ministry are evidently working more cohesively than ever before, and it would not be an exaggeration to say that the government seems laser-focused on achieving its ambitious mission of ‘Housing for All’ by 2022. That said, while increasing the carpet area eligibility is surely an impactful move, the government should also consider revisions to the interest subsidies so that homebuyers get better financial benefits,” says Puri.