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Affordable homes now account for over 20% of all properties sold in India

Developers are viewing this segment with renewed interest following a rise in demand

Moneycontrol News @moneycontrolcom

A price correction in the real estate sector is proving to be a boon for first-time home owners. Houses in the affordable category – those costing less than Rs 25 lakh – now account for a fifth of all residential sales in India.

The share of affordable houses in the property market has gone up from 8 percent in FY16 to 21 percent in the current financial year, according to data compiled by real estate consultancy firm Liases Foras.

Developers are viewing this segment with renewed interest following a rise in demand. The government has also intervened by doling out subsidies to economically weaker sections of society to enable them to acquire property.

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Artificial scarcity in the real estate sector had seen developers dedicating supply to the higher end of the value pyramid, with an eye on greater margins.

In the last three years, the share of luxury homes – those retailing for over Rs 2 crore – slipped from 14 percent to 5 percent. During this period, the sales of affordable homes almost tripled.

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A large number of pending deliveries of projects has dogged the real estate sector. The implementation of the goods and services tax (GST) and the Real Estate (Regulation and Development) Act (RERA) have contributed to the rationalis0ation of prices.

Pankaj Kapoor, founder and MD of Liases Foras, believes that it is not the invisible hand of the market that is responsible for this shift in the real estate sector, but that of the government.

He told Business Line that incentives offered by the government are drawing more buyers as well as developers to the affording housing segment.

Households with annual incomes of less than Rs 18 lakh are eligible for a subsidy of Rs 2.3 lakh, which is paid out upfront on a home loan. Besides this, they can avail income tax exemption on loans for housing.

The government is also offering developers tax sops through the PM Awas Yojna (PMAY). For affording housing projects, developers get 100 percent tax deduction on profits.

Flats with a carpet area less than 30 sq metres in four metro cities qualify for the deduction. The limit is 60 sq metres in other cities. It is also mandated that projects undertaken have to be completed within three years to claim the incentives offered by the government.

Developers are also diversifying their portfolio to cover the affordable housing segment. For instance, real estate firm Poddar Housing and Development has launched projects spanning a cumulative Rs 1 crore sq ft in low cost housing.

Rohit Poddar, Managing Director of the Poddar Housing, told the news daily that the demand for budget homes will only increase and its share of the market will rise to 40 percent in the next two years.

The lower cost of development and tax sops are also an incentive to builders since demonetisation mopped up excess liquidity in the system, adding to delays in completion of projects.

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First Published on Aug 17, 2018 10:59 am
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