After recognising a massive gap of housing in India, the union government had announced ‘Housing for All’ by 2022 in July 2015 to achieve the staggering target of bridging a gap of more 1.9 crore houses. 96% out of these are required for the Lower Income Groups (LIG) and Economically Weaker Sections (EWS) groups.
In India, while the population is growing at more than 2.1% every year and may touch 1.51 billion by 2030, growth in housing has been unable to keep the same pace. The central and states governments are now contemplating ways and means to provide access to housing for all. Affordable housing will not only fill the housing gap but be the next major economic growth driver by creating more than 2 million jobs during the period till 2022.
To fill the massive gap of affordable housing in India, the government has come up with a spate of initiatives:
- To encourage the PPP (Public Private Partnerships) model which can amplify affordable housing, the Union Budget 2016-17 announced that developers would be exempt from paying tax on profits in this segment for five years starting 2016.
- The government has increased the time limit to complete affordable housing projects from 3 to 5 years. Now, developers will have more time to complete affordable projects.
- The central government has raised the budget allocation under Pradhan Mantri Awaas Yojana from Rs 15,000 crore in 2016-17 to Rs 23,000 crore in 2017-18.
- The National Housing Bank, which is a subsidiary of RBI, has announced that it will refinance individual housing loans worth Rs 20,000 crore in 2017-18.
- Affordable housing was given the vital infrastructure status in the Union Budget 2017-18. Now, developers will have diverse and cheaper sources of funding, including External Commercial Borrowings (ECBs).
Financial Support & Subsidies
To promote affordable housing the government has announced several financial schemes, which will go to make housing loans in this segment cheaper:
- A 6.5% subsidy on interest on housing loans up to Rs 6 lakh can be availed for 15 years.
- Government assistance of Rs 1.5 lakh is extended for each beneficiary under EWS and LIG.
- A 4% and 3% subsidy has been given on interest for loan amounts of Rs 9 lakh and Rs 12 lakh respectively.
- The government is mulling waiving Stamp Duty charges and ways of reducing their impact.
- The middle-income group (MIG) of buyers with annual incomes above Rs 6 lakh to Rs 18 lakh is also included in the interest subsidy.
Affordable Housing Price Segment Dominated Residential Supply in H1 2017
Source: Anarock Research
The affordable price segment dominated residential units supply in H1 2017. The recent new launches trend shows that demand for affordable housing with ticket sizes in the range from Rs 5 lakh to Rs 40 lakh is continuously growing. During the first half of 2017, the top cities (Bengaluru, Chennai, Hyderabad, Mumbai, Delhi-NCR, Pune, Kolkata) recorded more than 60% of total residential units supply in the affordable segment.
The majority of projects in affordable housing segment were launched in the peripheral boundaries of top cities, largely due to non-availability of contiguous land parcels for large-scale mass housing developments and skyrocketing property prices in central locations of the cities..
In H1 2017, the share of the affordable housing segment in new launch supply increased by 16% over the second half of 2016. On the other hand, the mid and luxury segments witnessed a decrease of 4% and 9% percent respectively in the same period.
The author is chairman, Anarock Property Consultants.