Affordable Housing Could Be The Biggest Gainer In 2017

The latest announcement by Prime Minister Narendra Modi on New Year's Eve, regarding the interest subvention scheme is a refined version of a scheme announced in 2015. However, there is a degree of confidence among the realty players that unlike the previous scheme, the latest one would help deliver better. In addition to Modi's announcement, when many banks including SBI, PNB and UBI slashed lending rates by almost 0.9 per cent or 90 basis points, it did trigger some cheer in the market.

Also Read: SBI, PNB Slash Lending Rates, Affordable Homes To Get More Affordable

When the Centre had launched the 'Housing for All' scheme or the Pradhan Mantri Awas Yojana (PMAY) on July 25, 2015 setting itself the Herculean task of constructing more than 2 crore houses within a span of seven years, with a budget of Rs 260 crore earmarked for this scheme. However, altogether only 13,250 people availed of this scheme.

On the New Year's Eve, the PM announced that the Centre would provide interest subvention of four per cent and three per cent on home loans up to Rs 9 lakh and Rs 12 lakh respectively. Also, for the new housing or extension of housing taken up in 2017 in rural areas, a 3 per cent subvention will be given for loans up to Rs 2 lakh. With the new announcement, the government has widened the scope of the existing Credit Linked Subsidy Scheme (CLSS) , which is already a part of the PMAY. Both announcements carry a heavy burden for India's real estate sector that has high hopes with regards to market performance in 2017.

How the realtors are reacting 

Rajesh Goyal, Vice President CREDAI-Western UP & MD, RG Group

It's just the beginning of a rate cut cycle in India. Banks have a sizeable volume of liquidity due to the 50 days of demonetisation. It was forecasted that rate cuts will begin soon. RBI's next policy review is due in February as well as the Union Budget 2017-18. Hopes are high for more rate cuts in near future which will further ease the pressure that's on the economy and allow greater spending. This high purchasing power will result in people opting real estate as an avenue for returns as well as residence, as even interest rates on deposits are decreasing, thus making them less lucrative. In a nutshell, the real estate sector is on a track of growth well-supplemented by such initiatives.

Pradeep Aggarwal, Chairman, Signature Global

2017 will be the year of affordable housing segment and now especially with the government announcing incentives for this segment's prospective buyers and banks reducing lending rates, we will now witness more launches of affordable housing projects than any other segment.

Pradeep Aggarwal on banks reducing the lending rates

Banks reducing the home loan rates by up to 90 basis points is in general a great news for the sector ahead of Union Budget 2017-18. Most of the people begin property purchase planning around the budget period to get clarity about their financial year ahead. This in turn will allow demand for housing to increase this year that will help the realty sector to gain momentum. Affordable housing segment will reap the highest benefits because of extra cushion provided by the government's recent decision.

Vikas Bhasin, MD, Saya Group

With announcements, such as these, we are inching closer towards fulfilling the dream of building 2 crore affordable housing units for the urban poor by 2022. When lending rates are reduced, it allows the market to create fresh demand, and in this case, developers across the country will focus on developing affordable housing units which will be supported by reduced lending rates, and gladly accepted by the buyers.

Kushagr Ansal, Director, Ansal Housing

Since the affordable housing and housing for all missions have come up, developer lobby across the country has shifted its gears towards developing budget houses majorly. Almost 50,000 units are getting ready to be delivered by 2022 in Gurgaon itself; and across the country, this number is multiplying at the rate of knots. This, in the long run, will allow the country to meet the demand against the shortage of budget homes and allow everyone to get a roof over their heads.

Dhiraj Jain, Director, Mahagun Group

With the government's announcement of rebate on lending rates along with the banks providing rate cut cushion to the public, affordable housing segment is the biggest gainer of all. Citing the example of the lowest rate in the market at present, 8.60 per cent; affordable housing prospective buyers will be basically borrowing now at 4.6 per cent or 5.60 per cent for loans up to Rs 9 lakh and Rs 12 lakh, respectively. EMIs for this category have fallen by almost 40 per cent, which will enhance the demand for housing amongst the buyers.