Budget 2024:Home Financiers advocate for enhanced PMAY scheme and housing loan subsidies

Since the election results were announced on June 4, housing finance companies have surged on the stock markets

Affordable housing stocks, including LIC Housing Finance, Can Fin Homes, HUDCO, PNB Housing Finance, Home First, Aptus Value Housing, and Aavas Financiers, saw gains of up to 2 percent on July 22, as anticipation builds ahead of the Budget presentation. Investors hope for continued government support, with expectations of increased funding for the Pradhan Mantri Awas Yojana (PMAY) and additional subsidies for housing loan borrowers in Budget 2025.

Should these expectations be met, it could provide a significant boost to the housing finance sector and positively impact stocks in this segment.

Morgan Stanley analysts highlight that the housing finance industry is looking for increased funding in the PMAY-Gramin scheme, which could drive demand for homes in tier-2 and tier-3 cities. The revamped PMAY-G scheme is anticipated to raise cash support to Rs 2.3-2.4 lakh per housing unit, up from Rs 1.2-1.3 lakh in the previous scheme, to address rising construction costs.

ALSO READ: Budget 2024: Realty firms eye tax relief, redefining of affordable housing

The industry is also advocating for a revision in income tax policies. They are seeking an increase in the deduction limit for interest paid on home loans to at least Rs 3 lakh.

Additionally, experts are calling for a redefinition of affordable housing. The current definition includes homes with a carpet area up to 90 square meters in non-metropolitan cities and 60 square meters in major cities, valued up to Rs 45 lakh. There is a push to raise this limit to at least Rs 60-65 lakh in non-metro cities and Rs 85 lakh in metropolitan areas to facilitate further construction and extend benefits to more customers.

The affordable housing sector has struggled since the Covid-19 pandemic, while the demand for larger and more expensive homes has surged. According to Anarock, the share of affordable housing sales in India dropped from over 38 percent in 2019 to 20 percent this year. The overall supply of affordable homes also decreased from nearly 40 percent in 2019 to 18 percent this year.

Over the past decade, housing finance companies have outpaced banks in growth, with outstanding individual housing loans in India growing at a healthy CAGR of 15 percent and reaching Rs 30 lakh crore as of September 2023.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.