Real estate in 2019 has seen many new trends and stories unfold, but perhaps none more robustly as the saga of ‘Affordable Housing’. Be it from the supply side (builders and brands) or the demand side (individuals and families), the terrain has seen a surfeit of both optimism and action, raising hopes across-the-board and leading experts to believe that this will be one of the main drivers of the sector – and the nation’s economy – in the coming days.
So what are the factors driving the House-for-All movement forward? The push from the government is certainly the big one. Indeed, bringing housing within the reach of everyone has been one of the principal agendas of the current government. An ambitious goal of erecting over 4 crores new ‘affordable houses’ by 2022 – India’s 75th year of independence – has been firmly set in the crosshairs. And both supply and demand sides have big gains in store from the impetus from the government.
Buyers will now get to enjoy a tax deduction for homes costing up to ₹ 45 lacs. And the Middle Income Group (MIG) will doubtless smile as the benefit of CLSS (Credit Link Subsidy Scheme) on home loans is extended to March 2020 as per the PMAY (Pradhan Mantri Awas Yojana – Urban) program. But that’s hardly all.
Construction of dwelling units under PMAY are being completed faster than ever – the figure is down to 114 days in 2017-18 from 314 days in 2015-16. Developers now have a full year to pay tax on notional rental income on units and inventories that are ready-for-possession but not sold. Tenure for long-term capital gains has been brought down to two years (from the previous 3-year figure) for the Affordable Housing segment. And Real Estate is now officially an ‘industry’ which makes, amongst other things, mobilizing funds easier for builders – which is bound to have a ripple-effect benefit on the end-customer.
The Budget for 2019 has added to the good news. The Finance Minister has proposed that 1.95 crore houses – complete with features and facilities like electricity, toilets & LPG – will see the light of day in rural India under PMAY from the Financial Year 20-22. And if one sells a residential home and plows the money back into a start-up (within 31 March 2021), one will be able to enjoy capital gains.
The RBI (Reserve Bank of India) has taken several steps as well. It has already expanded the ambit of priority sector lending to loans of value up to ₹ 35 lacs. The combined decision to raise carpet area and restricting priority sector eligibility for housing loan limits is bound to bring units that are under construction within the ambit of the CLSS. Not just that – the RBI has flagged rising bad debts in small-ticket loans while reminding all stakeholders of regulatory tightening of home loans up to ₹ 2 las. The RBI remains open to more policy appraisals as and when the occasion arises, and this kind of dynamism can only fuel the affordability movement forward.
More constructive steps such as allocating land parcels at ‘friendlier’ prices, expediting processes & implementation, making a reduction in construction inputs and engineering policy-level changes are bound to make ‘Housing for All’ a reality – sooner rather than later.
All told, there has never been a better time to focus on the Affordable Housing Sector – either from the point of view of an end-user or an investor.