The labour ministry recently apprised the Rajya Sabha of its intent to amend the law and allow subscribers to withdraw up to 90 percent of their provident fund to buy or build homes. They also plan to allow EPFO users to pay their EMIs of home loans through the EPF accounts.
On how the above development will benefit the company JC Sharma, Vice Chairman and MD, Sobha said going forward almost all the leading developers who will have the ability to withstand the RERA, will be forced to look at affordable homes in order to create demand.
With regards to Sobha, he said the Sobha Dream Series affordable housing project will complete 3 buildings in its first phase by next quarter.
According to him, the margins of affordable housing are the highest compared to all other projects as well.
Below is the transcript of JC Sharma's interview to Latha Venkatesh and Reema Tendulkar on CNBC-TV18.
Latha: You must have heard of this Labour Ministry announcement. It is a law we are waiting to see, but did it come with caveats?
A: I do not think it is coming with any kind of caveat. Whatever the Honourable Labour Minister had spoken in the parliament, if we interpret it correctly, what he says is he is going to make amendments in some of the projects will allow an Employees' Provident Fund (EPF) subscriber either to take 90 percent of the money deposited as his contribution towards the housing purchase or permitting him through a cooperative housing society structure where they can pay the EMI for the housing loan he is going to take from the market.
So with 4 lakh subscribers and 9 lakh crore plus corpus, this kind of a push towards housing will go a long way to those ineligible people now, especially in the public sector undertakings and government employees to start thinking of buying a home.
Reema: The government has been talking about affordable housing, home for all, at least the first time buyers ever since they have come to power. You have launched an affordable housing project called Sobha Dream Series. If you could tell us what the uptick has been and what the progress has been on affordable housing for your company in particular?
A: We had launched this project about two years back. 6,945 units to be precise which roughly falls under your affordable housing scheme. We have already done close to three million sq ft of sales and the first phase of three buildings are being delivered in the next quarter within a short span of two years.
We believe that with the kind of incentives which, post this Budget and with the continuous reduction in the interest rates and also redefining this Pradhan Matri Awas Yojana, which will be made applicable to the middle income group homes and maybe to the high income group as well, this kind of a product should keep attracting the customers in large numbers.
Latha: This Pradhan Matri Awas Yojana and this six percent subvention for Rs 6 lakh houses now being raised to Rs 12 lakh, that is what you were referring to, the Prime Minister's speech.
A: It is Rs 9 lakh and Rs 12 lakh.
Latha: Yes, what we heard from the housing guys and National Housing Bank (NHB) is that last year in that 6 percent Rs 6 lakh, there were hardly some 50,000 accounts which were given. We have not heard that they have made the final notification of what the Prime Minister announced in terms of moving it to middle income houses or this Rs 9 lakh. Have you heard?
A: No, what you are talking is what was applicable under the economically weaker sections (EWS) housing scheme which has not become that popular, you are right. What now we are talking about is a notification which has already been gazetted on March 11, this month which talks about the category what just now, you mentioned and it has been notified to all the central nodal agencies which is NHB and Housing and Urban Development Corporation (Hudco) as well as to the non-banking finance companies (NBFC) and the banks which are disbursing this loan. You can talk to this HDFC people. They are aggressively working on that.
Latha: And that gives a 3 percent subvention? What is the subvention available?
A: 3 percent subvention if your income is up to Rs 12-18 lakh and you can buy a home of 110 sq m carpet area and 3 percent subvention equivalent to a net present value (NPV) calculated on 9 percent interest roughly Rs 2,30,000. It is like Modi giving money to your account as your contribution comes to the account. And for middle-income group category-I, up to Rs 9 lakh, 4 percent subvention NPV of which comes to Rs 2,35,000. So, that money is given up front which is a great relief.
Reema: So, apart from Dream Series and the completion of the remaining phases, has Sobha announced or is it planning to announce any more affordable housing projects and if you could give us some details about that?
A: We are eagerly waiting for these Budget proposals to be approved by the parliament because we believe that the government, at this point of time has not been able to make up its mind about the definition of affordable homes and the income tax benefits. But certain projects are getting identified and we do believe that on the one hand, the restriction on people not to have more than one home, at the same time, to give this kind of a push to make everyone buy a home which government considers affordable from the size as well as from the income kind of thing with the flexibility what they have shown.
Once the Budget proposals are also made clear, hopefully, most of the developers will look at this sector, affordable housing in particular with great enthusiasm.
Reema: What are the margins on affordable housing, say the project that you are currently implementing?
A: It is having the highest margin on almost all my ongoing projects right now.
Latha: What is the industry size now of affordable housing and because of this scheme, what kind of increase can you reasonably expect in FY18?
A: We need to be a bit cautious on Real Estate Regulation and Development Act (RERA) part also. This is also becoming a law. The goods and service tax (GST) also, we need to have clarity under what category we will come. But net-net what I can assure you that going forward, almost all the leading developers who will have the ability to withstand the RERA, they will be forced to look at affordable homes in order to create demand.
Latha: You expect GST to be a roadblock? What kind of problems do you see?A: If they put us under that 18 percent kind of a bracket, then today, what most of the developers are paying towards value added tax (VAT) and service tax versus what they will be required to pay, it should not make housing more costlier. That was our point. So, till we do not have to pay extra revenue to the government and price increases do not take place, it will be beneficial, otherwise problem.