8 Developments In The Affordable Housing Market You Must Know Of

Amid the commotion triggered by stalled and scrapped projects in the National Capital Region (NCR), one of the top concerns of the Central government, affordable housing, is making a progress. Here are some of the recent developments in the affordable housing scheme you may have missed:

More sales

One-fifth of properties for sale in India is within Rs 25 lakh, that is one in every five homes. This growing segment has pulled the share of affordable housing to 21 per cent from just 8 per cent in financial year 2016. Some see this change as a result of price correction. However, in reality such corrections did not take place. Wherever prices dropped, it did so marginally suggests Proptiger data. Over the last three years, prices have only stabilised and external determining factors such as a slow market, onset of a new tax regime, currency ban and structural or policy reforms have arrested the growth in property prices. It should, however, be noted that developers are taking an interest in building low-cost homes and this is an opportune leap for the property market in India. Here is a look:

Government: Force behind affordability

“The government has laid extraordinary focus on affordable housing with the launch of PMAY. Urbanization in India has been increasing at a rapid pace. By 2030 it is estimated that half of India's population will be residing in urban India which implies more demand for housing," says Renu Sud Karnad, managing director, HDFC. The organisation was adjudged the best performing lending institution in the Credit-Linked Subsidy Scheme (CLSS) for the EWS and LIG homebuyers.

Clearly, home ownership under the flagship scheme Pradhan Mantri Awas Yojana (PMAY) has more benefits for an owner. Previously, owing to slow sales, most developers had shifted their attention to the premium segments priced Rs 2 crore and above. As a result, the affordable segments remained largely neglected for a long time. As per a Moneycontrol finding, in FY19, 21 per cent of sales is happening in the under Rs 25 lakh segment while properties in the range of Rs 25-50 lakh boasts the lion’s share at 36 per cent. Homes priced between Rs 50 lakh to Rs 1 crore also sweeps 29 per cent of sales share while those properties priced above Rs 1 crore hold 14 per cent share in the sales. With incentives being rolled out for owners of affordable housing, the segment will see more sales in the coming years. As of now, those earning an annual income of up to Rs 18 lakh are eligible for a subsidy of Rs 2.30 lakh, paid upfront on a home loan. Developers too have the benefit of saving 100 per cent tax deduction on affordable housing.

Lower stamp duty

The Central government's think tank has suggested a collaboration with the states and hence, lower the stamp duty. Another suggestion put forth was that states should release land caught in litigation due to outdated rules with respect to an urban land ceiling. The loss thereby caused due to lowering the cost could be recovered once it triggers a positive momentum in the market and more people are induced to buy.

Focus on small cities

Given the popularity of affordable homes, the State Bank of India (SBI) is deploying additional resources and working on a quick-approval process for home loans in this sector. Small cities are a promising avenue where the number of homebuyers looking for affordable homes is higher, feel authorities. The Pradhan Mantri Awas Yojana (PMAY) has been a hit among those looking at low-cost housing and professionals are being trained to get in touch with such prospective takers and explain the schemes to them. SBI's average home loan is Rs 24 lakh and its customers are mainly salaried first-time homebuyers, claim reports. Out of the 2.7 lakh home loans sanctioned last year, around 1.7 lakh were customers with an annual income of up to Rs 6 lakh who are eligible for higher subsidies under the PMAY.

GST relief for work contracts

In a recent notification, it was brought to notice that the Goods and Services Tax (GST) on work contracts for affordable housing up to 60 sq mt, in an approved project would be 12 per cent as against 18 per cent including the state GST. However, it may have little effect as most developers prefer not hiring work contractors in order to keep operational costs as low as possible.

Sick units get a fresh life

Sick public-sector enterprises may end up losing their land but it does favour the cause of affordable homes. Seven land parcels have already been identified in Pune, Ranchi, Gurgaon, Nainital and Burdwan and together they have yielded 2,500 acres of fresh land for affordable housing projects.

New tech challenge

Affordable housing will not gather any speed if an apt technology doesn't surface. The Central government is now focusing on an India Housing Construction Technology Challenge in 2018 to identify the most cost-effective way to build 1.2 lakh affordable homes by the Housing For All deadline in 2022.  Niti Aayog CEO, Amitabh Kant was quoted as saying, “You cannot do affordable housing if you are constructing them in three years. The rate of interest is so high that it will never be affordable. Affordable houses need to be constructed three to four months and that is possible with the help of technology.”

Call for easy approvals

Affordable housing could have taken off at a greater speed had a system of single-window clearance was put in place. RBI Governor, Urjit Patel has pushed for this. As of now, projects catering to all income segments have to necessarily go through a long wait before they receive all the approvals and it takes six to twelve months. Given that affordable housing is a pet project of the central government, single-window clearances are the need of the hour.