New Delhi, February 11, 2017: The Union Budget 2017 brought a number of reasons to cheer about in the real estate market after what seemed like a rather dull year end. We had pinned high hopes and the government did not disappoint us with the kind of announcements that were made – the most important one being infrastructure status given to affordable housing.
This was essentially a major move considering the affordable housing market had been waiting for a positive push to gain momentum since long. This shall make way for bigger developers to foray into the affordable housing segment especially with the kind of clarity given to the carpet area and the built area. It also means availability of cheaper funds and lower taxes for developers.
The country roughly needs around 20 million houses in the affordable housing segment. Previously, due to lack of any major incentives, private players shied away from taking up any affordable housing projects. Despite the Housing for all by 2020 vision of the central government, aim seemed far from achievable till last year. However, the government has clearly shown its intent through the budget and the fact that it is indeed serious about focusing on the affordable housing segment.
As a result, the supply is bound to increase and we are looking at an increase of at least 15-20 percent. Banks have seen surplus liquidity post the demonetization move which has led them to reduce lending rates including those for housing. The central government has also announced interest subvention of 4 per cent and 3 per cent on loans up to Rs 0.9 million and Rs 1.2million respectively. All of these make affordable housing an attractive segment to get into for developers.
As for demand, there has always been a steady one in this segment however, due to lack of quality affordable houses in urban areas, buyers tend to shy away from making the final deal or prefer to wait till the prices fall any further. With the growth in supply, I am hopeful buyers will finally take the plunge and will also get more options to choose from.
However, developers will now face challenges like the demand to increase the density norms in order to fulfill the 30 sq meters and 60 sq meters criteria of housing. Certain states, especially in North India have very low density norms which makes it impossible to achieve 30 sq meters of housing. Unless density is increased, supply of such houses will not see any significant increase.
As for buyers, the proposed deduction of income tax rate to 5 percent for tax payers with income less that Rs 5lac per annum is going to raise the spending power with an increase in the disposable income of the common man, thus directly influencing the demand and buying power for affordable housing.
Corporate Comm India(CCI Newswire)
