How Affordable Housing Has Changed The Face Of Indian Real Estate


India’s real estate sector witnessed some significant developments over the past year-and-a-half. These have changed the face of the industry and augur well for it in the long run. The sector has become more transparent and organized owing to recent policy changes and consumers are better off for these. The Union Budget 2017-18 announced with the theme of Transform, Energize and Clean India (TEC), was largely geared towards rural growth, infrastructure, and poverty alleviation, with a huge impetus to affordable housing. The thrust on affordable housing renews government’s vision of ‘Housing for all by 2022’, giving a cheer for the housing segment.

After a wait of several years, the government has finally awarded infrastructure status to the largely-neglected affordable housing, which is encouraging for real estate developers. Infrastructure status will ensure easier access to institutional credit and help in reducing developers’ cost of borrowing for affordable projects. Accordingly, infrastructure status will further simplify the approval process for affordable projects, create clear guidelines and increase transparency in the segment.

Experts of the industry say, “In the last union budget presentation, affordable housing India got accorded with infrastructure status, thus signalling a strong government support for the same. The reinforcement was never late as after GST’s implementation, hopes were high that either this segment would be kept out of the ambit or the lowest bracket would be provided. With prices going up post the tax reform, the government will have to find out ways of minimizing the effect of this rise on the average Indian homebuyers.”

Mumbai’s much-awaited Development Plan 2034, approved by Maharashtra chief minister Devendra Fadnavis, is aimed at creating a million affordable homes in the city and provides extra floor space index (FSI) for both residential and commercial construction. Even though the Development Plan (DP) for Greater Mumbai has gone through several revisions in the past, the work seems to have now paced up, bringing smiles to people’s faces.

Under the new DP, developers will get more floor space index or FSI, which is the ratio of a building’s total floor area to the area of the plot. While FSI in the island city has been raised to 3 from 1.33, for the suburbs it has been raised to 2.5 from 2. For commercial constructions, FSI has been raised from 1.33 in the island city to 5 and from 2.5 in the suburbs to 5.

Affordable housing is a real game changer
The availability of cheaper finance schemes is boosting the demand for affordable housing in India, enabling homebuyers to make purchase decisions for homes that meet their financial budget. The interest rate on home loans is on the lower side for some time now. Moreover, interest subvention through CLSS under Pradhan Mantri Awas Yojana makes it easier to buy an affordable apartment.

The project completion deadline has been increased from the current three years to five years, granting affordable housing developers more time to finish projects. Also, the eligibility criteria have been revised to 60 square meters and 30 square meters on the carpet for non-metros and metros respectively, rather than the saleable area, which was previously the norm. This dramatically expands the size of the affordable housing market. To augment the benefits of affordable housing, the Union Budget announced a new Credit Linked Subsidy Scheme (CLSS) for the mid-income group with a provision of Rs. 1,000 crores.

Over more, the rising urbanization, increasing affordability, availability of cheap finance, regulatory support, and the government’s policy thrusts are finally making affordable housing in India a reality. The initiative to fill in the gap of urban India’s housing shortage is expected to pump in a massive investment of $1.3 trillion into the housing sector. With affordable housing being at the centre of this historic movement, the segment is undeniably poised to be a game changer that the real estate industry was looking for.


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