Housing for all by 2022, because every soul craves for a home to come back”
The government's efforts to boost affordable housing in order to reach the objective of “Housing for All by 2022” have roared the best possible results. All indicators including the much-needed supply, pick-up in housing loans and sales in this category are heading towards the targeted direction. The burden of price rise has occurred enormously due to this maintaining & enhancing affordability is essential.
The population pressure in urban areas is higher than the rural areas, majorly in the cities of Mumbai, Delhi and Kolkata. The object is to develop Tier II cities of Pune, Ahemdabad, Hyderabad, Bangalore, etc. along with rural areas to ensure that the population pressure shifts from overpopulated cities. The government is collaborating with private builders and developers under a public-private partnership (PPP) model to make this dream come true. Many developers have responded positively in this upcoming segment of the real estate sector on account of benefits enjoyed by them over the Pradhan Mantri Awas Yojana (PMAY). The Ministry of Housing and Urban Poverty Alleviation defines affordable housing on the basis of size of a unit, its price and the income of a household.
The government has provided 39 percent higher allocations for affordable housing development in Financial Year of 2017 under the PMAY. Moreover, it has extended the Credit Linked Subsidy Scheme for housing loans of value up to Rs. 12 lakh. And, while the government has traded a number of steps to meet the demand with supply and undertake the affordability issues for the middle- and lower-income stratum, it has accorded infrastructure status to the affordable housing segment in this year’s budget. Developers who build affordable homes are exempted from paying taxes on their profits for five years starting 2016 instead of three years. These are for 300 sq ft homes in the four metro cities and 600 sq ft in non-metro areas.
On account of the real estate regulations, this field is fixing more credibility, property investors focusing heavily on affordable housing for the intended income groups. Affordable housing is now a highly profitable long-term proposition for real estate investors, and developers also stand seriously for profit creation. However, targeting appropriate cities suffices the trend of nuclear families which is increasing in the metropolitan cities where IT and other major corporate sectors are located. In cities like, Chennai, Thiruvananthapuram, Navi Mumbai, Gurugram, Noida and Pune, young professionals are desirous to own homes as new job opportunities are offered in them. Affordable housing will be a major hit in these cities as it shall benefit both ways i.e. developers and purchasers.
The crux of the scheme will include, Eligibility for the scheme, Size of unit of affordable houses, location of houses i.e. metros vs non-metros, construction and repurchase projects, benefits to women, etc.
This translates into easy financial credit for builders and makes it a lucrative segment for them to invest in. The affordable housing segment in India is set to grow at a faster pace than the rest of the real estate sector- at over 30 percent in the medium term- and will be the key growth driver for the Indian mortgage finance market.
Bodies for housing development
- Members of builders body the Confederation of Real Estate Developers Association of India (CREDAI) have announced launching total 375 affordable housing projects across the country with investment commitment of Rs 70,000 crore. It has become the preferred platform with regard to national discourse on Housing and Habitat through strong networking with Government, Policy Makers, Investors, Financial Institutions and Real Estate Developers. Its initiatives have been fruitful in liberalization of FDI and investment regimes, streamlining of approvals and creation of financial instruments culminating in the goal of housing for all by 2022.
Several incentives for affordable housing including the infrastructure tag, extension in timeline for project completion and with regards to size of these houses have been helpful in drawing interest for all the stakeholders including developers, financiers and homebuyers. Ahmedabad was the largest contributor of affordable homes (costing less than Rs 30 lakh), followed by Pune (up to Rs 50 lakh).
- National Real Estate Development Council (NAREDCO) established under the of Ministry of Housing and Urban Affairs, is the apex national body for the real estate industry and visualized it as a single platform where Government, industry and public would discuss various problems and opportunities face to face which would result in speedy resolution of issues. It is inducing transparency and ethics in real estate business and transforming the Indian real estate sector into a matured and globally competitive business sector.
- National Housing Bank (NHB), a wholly owned subsidiary of Reserve Bank of India (RBI) is an apex financial institution for housing. It has been established with an objective to operate as a principal agency to promote housing finance institutions both at local and regional levels and to provide financial and other support incidental to such institutions and for matters connected therewith. NHB registers, regulates and supervises Housing Finance Companies, keeps surveillance through On-site & Off-site Mechanisms and co-ordinates with other Regulators.
Share prices of real estate and cement companies have already been moving up on account of this major affordable housing push. According to a recent report published by India Ratings and Research- demand for affordable housing will increase to 25 million homes in the next five years, opening up a market opportunity valued at Rs 6 lakh crore for housing finance companies (HFCs).
The matter of concern to do this include government support in terms of land for this segment for affordable housing which remains a big challenge and we need to see more land being either supporting the developers to acquire the land or providing in some kind of partnership with the developers to make more and more houses available in this segment where the borrowers can actually buy.
The efforts announced by the government for economically weaker sections and low-income groups to boost mass housing in peripheral areas with attractive interest subventions have helped a great deal. These drivers, along with the industry's efforts to create awareness, are helping expand financial inclusion.