India, a country where slums and luxurious homes sit cheek by jowl, is all set to have a new growth driver for its real estate market. Term “affordable housing” has become the driving force behind the India real estate growth. Affordable housing means providing homes to the people belonging to the lower and middle income groups of India. The Honorable Prime Minister of India, Mr. Narendra Modi launched the “Affordable Housing For All By 2022” mission on 17 June 2015 with a dream to provide shelter to the homeless in India. The rating agency ICRA revealed on 22 March 2017 that the affordable housing sector would see a 30% increased growth as compared to the overall growth of the Indian real estate market.
Rohit Inamdar, Senior Vice President & Group Head at ICRA said, “With the focus of the government on the affordable housing segment, including a number of initiatives such as 39 % higher allocations vis-a-vis FY 2016-17 under the Pradhan Mantri Awas Yojana (PMAY), extension of the credit-linked subsidy scheme to loans of value up to Rs 1.2 million, efforts are being made to address the supply side, demand side and affordability issues and are likely to expand the borrower base.” The government has collaborated with private builders and developers to trigger the process of providing affordable housing. After seeing a huge demand in this segment in the first quarter of 2017, the government is able to meet this demand with increased supply of affordable houses.
Steps Taken To Make Affordable Housing For All By 2022 A Reality
- Infrastructure Status: The Indian government has taken several steps to provide a roof over the head of everyone in this strata at an affordable price. Giving infrastructure status to affordable housing in Budget 2017 was one of the key steps taken by the government to boost the growth of the affordable real estate segment. Getting access to institutional credit, offering transparency in the transactions, and getting approval for the projects would become easier with the infrastructure status given to affordable housing. Moreover, they can now raise loans at lower interest rates for their projects whose benefits, if passed on correctly, would lower the price of housing projects. This would encourage more developers to invest in affordable housing segment which would ultimately increase the supply of affordable houses.
- Increased Funds In Pradhan Mantri Awas Yojana: The Pradhan Mantri Awas Yojana is one of the most crucial steps taken by the PM Narendra Modi-led government to achieve the vision of affordable housing for all by 2022. This scheme would be providing housing facility to the people of the Lower Income Group (LIG) and the people of the Economically Weaker Section (EWS). In the Union Budget 2017, Finance Minister Arun Jaitley announced that the funds allocated to the Pradhan Mantri Awas Yojana would be increased from INR 15,000 crores to INR 23,000 crores for the next fiscal year. Last year the budget was set at INR 15,000 crores and to speed up the process of construction of one crore houses by the end of 2019, the Finance Minister increased the allocated amount to INR 23,000 crores.
- RERA And GST: The Real Estate (Regulations and Development) Act and the Goods and Services Tax are two of the government reforms that have also been instrumental in the growth of the affordable segment of the Indian real estate market. While RERA has made real estate more transparent and affordable, GST has eradicated any possibility of multiple or cascading of taxes to boost the affordable houses scheme.
One thing is certain that affordable housing is not just seeing a positive growth in the Indian real estate market, but is also surfacing as the driver for the growth of real estate industry of the country. A number of developers and heads of the real estate companies have shared the same opinion about the growth of affordable housing sector. Sumit Berry, Managing Director at BDI group shares that same opinion and says, “According to estimates, around 600 million people are expected to settle down in urban India by 2031, a rise of whopping 59 per cent over 2011. The current housing deficit in India stands at 19 million units, which in the absence of any meaningful intervention, is slated to double to 38 million units by 2030. Thus affordable Housing is the need of the hour. Fortunately, the government is collaborating with private builders to make affordable housing a reality. The most important factor that has provided a fillip to affordable housing is granting of infrastructure status. RERA has also infused fresh hopes in home -buyers.”