Affordable housing | What are the announcements expected from Budget 2022?

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Over the past few decades, India has witnessed increasing urbanisation and inward migration to cities, which has resulted in a significant change in the demographic profile of its urban centres. The housing demand in such urban centres has been concentrated in the mid and affordable segment. There has been limited focus on affordable housing developments owing to unavailability of low-cost land, increased construction costs and low margins.

Thus, a considerable demand-supply mismatch has resulted in India’s cities. Considering the housing shortage for Economically Weaker Section (EWS) / Low Income Group (LIG) segment in urban areas the Indian government launched the Pradhan Mantri Awas Yojna (PMAY)-U (Urban) in 2015. As of January 2022, Uttar Pradesh, Gujarat, Maharashtra, Andhra Pradesh, and Madhya Pradesh were the top five states with an aggregate of around 30.97 lakh houses completed under PMAY-U.

The government has been paying keen attention and over the course of the past few years has taken a series of steps to promote the cause of Affordable Housing in India.

The Union Budget announcements in the recent past have mentioned several measures to promote the growth of Affordable Housing sector in India. However, the absorption of affordable units has been marginally impacted due to the onset of the Covid-19 pandemic which resulted in a bleak economic scenario coupled with liquidity crunch and unstable income of EWS/LIG homebuyers.

Here are a few of the expectations from Budget 2022 which may stimulate the next stage of growth in the Affordable Housing sector with a high multiplier impact:

• Widening the definition of affordable housing to include the units priced above Rs 45 lakh, for extending the benefit to a large number of home buyers and encouraging more players.
• Moderate increase in the Rs 2 lakh limit on interest deduction under section 24(B) for tax rebate for home buyers.
• Extension of benefit under section 80EEA up to March 31, 2023, to avail additional Rs 1.5 lakh interest deduction on home loans for first-time homebuyers. Any relief on a second home would be icing on the cake and would stimulate the sector.
• Extension of Income tax benefit under Section 80IBA till March 31, 2023, with a uniform criterion on the residential unit size for projects located in metropolitan cities or any other place.
• Extension of benefits under Credit linked subsidy scheme (CLSS) scheme under PMAY-U for Middle Income Groups (MIG) until March 31, 2023.
• Increase in government’s contribution to 'Special Window for Funding Stalled Affordable and Middle-Income Housing Projects' (SWAMIH) funds along with relaxation in the rules and qualifications for availing the benefits from the government-backed last-mile financing platform.

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Chintan Patel

Partner and Leader – Building, Construction and Real Estate|KPMG in India

[1] Pradhan Mantri Awas Yojana website, https://pmay-urban.gov.in/, accessed on 24 January 2022