How affordable housing unfolds in the current scenario?

When it comes to affordable housing segment, many of the measures that were pending for a long time were materialized in the Union Budget 2017

With the coveted ‘infrastructure status’ being conferred to affordable housing, the unorganised real estate sector has turned optimistic. India is at the juncture of becoming the most populated nation, and it would add woes to the already existing housing problem. Rapid migration towards urban centres, lack of infrastructure and the concurrent housing dilemma has created a millstone around our necks. Presently, there is a shortage of 18.8 million homes in urban areas out of which 15 million are needed by people from LIG (lower income group). 

The past and present Governments have taken various measures to address the burgeoning crisis. Though, the most significant one was the Modi government’s launch of ‘Housing for All by 2022 Mission’ in 2015, which had affordable housing under its purview. The mission focused on slum rehabilitation with participation of private developers using land as a resource promotion, affordable housing for weaker sections through credit linked subsidy, implementation of PPP (public private partnership) model and subsidy for beneficiary-led individual house construction or enhancement. 

When it comes to affordable housing segment, many of the measures that were pending for a long time were materialised in the Union Budget 2017. The budget demonstrated a fiscal prudence by boosting the housing sector through its new policies and schemes. The most noteworthy was the conferment of ‘infrastructure status’ to affordable housing, which would spur humongous investment in the segment. The status will help in minimising the cost of borrowing for developers, increasing the access to finance, opening of ECB (external commercial borrowing) and creation of tax benefits. 

Despite, a high demand for affordable housing there has been limited participation of private developers. But, with the budget allocation of Rs 23,000 crores for affordable housing under the PMAY (Pradhan Mantri Awas Yojana), boost in home loans, profit link exemption, change in carpet area for low income group there will be an increase in the participation of private developers in affordable housing. 

Affordable housing is yet to grow more, as the home buyer’s confidence has got a boost due to interest subvention of 4% and 3% on housing loans of up to Rs 9 lacs and 12 lacs. Icing on the cake, the RBI (Reserve Bank of India) has also increased the limit for home loans availed for purchasing budget homes. Previously, the limit was mere Rs. 25 lacs which has now been raised to Rs 65 lacs in the primary Indian cities and Rs. 50 lacs in tier 2 and tier 3 cities and towns. 

In an effort to boost affordable housing segment the government has revised the guidelines for determining the area of affordable housing projects. According to the guideline instead of the built up area of 30 and 60 sq. mt., the carpet area of 30 and 60 sq.mt. will be considered in affordable housing. The 30 sq.mt. limit will apply only in case of municipal limits of 4 metropolitan cities while for the rest of the country including the peripheral areas of metros, limit of 60 sq.mt. will be applicable. The time of completion for such projects has been extended from 3 years to 5 years. 

The affordable housing segment needs more avenues to grow along with providing incentives to banks for supporting affordable housing. Developers of affordable housing projects must be given plethora of opportunities so that it may encourage more developers to join the bandwagon. Similarly, the government which is focused on the smart cities concept must also pay heed to the concept of developing ‘affordable cities’.  Finally, there is lot of land in various parts of our cities which is held by various government bodies. There have been instances where these chunks of land are auctioned to developers for developing a luxury residential project, which may be more lucrative but, there should be measures on part of the government to build affordable housing projects on these lands so as to promote affordable housing segment.