Affordable Housing-The new address to luxury
In the prevailing era of population explosion, around one fifth of the world’s citizenry is which is equivalent to around 70 percent of the Indian crowd are residing in the rural and underdeveloped areas. Due to this rapid population growth, a chunk of it is forced to live in rural villages being deprived of suitable shelter facilities leading to a rise in the formation of slums or kaccha homes. Taking this plight into consideration, the Indian Government has initiated various schemes which are highly desideratum to bridge the housing gap. Going by the current statistics, it has been indicated that the current demand for urban housing facilities ranges up to 18.8 million, which is further expected to escalate and reach a minimum of 20 million by 2022.Unparalleled efforts and endeavours in the right direction by the Indian government is the need of the hour to meet the elevating housing demands. Courtesy to the current budget, conventions and their formulations to boost the sector was one of the key talk points of the discourse.
The most important question here is, how effectively will this initiative be implemented? While delivering the Union Budget 2017, Finance Minister, Mr.Arun Jaitley mentioned in his speech about ways in which the current budget will propose to facilitate higher investment in affordable housing, thus totally transforming the sector. The budget also highlighted on conferring an infrastructure status to the Affordable housing segment, enabling these projects to avail the associated benefits”. 20 Million Homes by 2022 means at least 3 Million houses a year when compared to the actual delivery of the homes during the 11th Five Year Plan (2012-17) which was 1.2 million. The goal appears to be formidable with lack of the proper mechanism and actionable. It is next to impossible for the central and state government to perform such a mammoth task unless there is equal participation from the private players. Private developers that dominates the segment have to face the miseries of thin margins and ambiguity in approvals, which ultimately lead them to offer low participation in the implementation of such constructive government initiatives.
Welcome measures like grant of granting infrastructure status to the affordable housing, incentivizing private developers for participation by giving faster approvals, single window clearances and allowing for 100% deduction for the profits under Income Tax, can help lessen the burden on private players, thus pushing them towards actively participating in the initiative of housing benefits. This would lead to an increase in the participation from the developers, bring us close to achieving the dream of Housing for all by 2022. Along with the supply side being taken care of, the demand craves for equal attention. In order to promote this concept, Finance Bill provides for accurate measures by providing the definition of affordable housing. (The area designated for metro cities is up to 30sq. mtrs. of carpet area while for other cities it is 60 sq. mtrs along with increasing the completion phase to 5 years).
It’s very important to understand that affordability not only depends on the size of the carpet area but also the ticket price of the unit. Its important to understand that, affordable real estate in terms of the Mumbai market would not be the same as in that of tier-II cities like Kochi, Indore. & Nagpur. It has been estimated that about 96% of the population out of the total population of 18.8 Million below to EWS and LIG category can’t afford a home more than INR 10 to 12 Lakhs. The required demand for affordable housing will be created with the introduction of Credit Link Subsidy Model and subsidized loan interest for the loan amount up to INR12 lakhs. The most vital element here is, to bring the entire Indian realty segment within the ambit of one central regulation act i.e. Real Estate Regulation and Development Act 2016. This is an important step required to boost confidence in real estate for inventors and buyers.
Why status of Infrastructure is important?
With the burgeoning land prices, inflations and global shocks, slow sales and recovery past few years have been very tough in the orbit of Indian real estate. Under such circumstances, funds are available at a higher rate of interest ranging from 18 to 24%, thus falling prey to the debt-trap. Also situations like approval delays will lead to projects being stalled. With bestowing aninfrastructure status on the affordable residential sector, the approval process for projects will definitely advance. Cost to loans will diminish to around 11 to 12% for a prolonged span, which in turn will condense the burden of debt from the shoulders of the developer. Most importantly, the developers can now build fast and deliver the projects in a short span and benefit of the same will pass on to the buyers as well.
Thus, some productive measures by the government is all set to bring about confident changes in the residential segment and will be able to cater to the growing population needs of our country, thus , indicating towards a gleaming real estate future.