As the NDA-led government prepares to present its full-year Budget, the real estate sector anticipates major policy reforms to boost the shrinking affordable housing segment in the country. Apart from a major allocation to Pradhan Mantri Awas Yojana (PMAY), experts say initiatives such as the Credit-Linked Subsidy Scheme (CLSS) under PMAY and tax incentives for developers can help boost the segment at large.
Currently, affordable housing in India is defined as a house or flat with a carpet area up to 90 sq m in non-metropolitan cities, and 60 sq m in major cities, valued up to Rs 45 lakh for both.
According to a recent report by ANAROCK, the share of sales in affordable housing decreased from 37 percent five years ago to 20 percent in 2023. Several metro cities faced its brunt — with Bengaluru housing sales dipping by 2 percent from the year-ago period following a sharp drop in the affordable housing segment, Moneycontrol reported in April.
The downward spiral of this erstwhile poster child of the Indian housing industry began during the pandemic and then its share dipped rapidly. "Even as the nation awaits the results of the ongoing general elections, any affordable housing revival will hinge on further government standard operating procedures (SOPs) and incentives for buyers and developers," Anuj Puri, Chairman - ANAROCK Group said.
Changing definition of affordable housing, tax incentive
G Hari Babu, President of the National Real Estate Development Council (NAREDCO), said that the definition of an affordable residential apartment, which currently includes criteria for carpet area and a price cap, also needs revision.
NAREDCO recommends retaining only the carpet area condition without the price limit. This change would accommodate higher land prices in metro cities and extend affordable housing benefits to more projects, enabling a larger portion of the lower and middle-income population to buy homes.
Additionally, developers say that extending rebates under the Income Tax Act to the developer should be made available to encourage them to enter into the affordable housing sector. "It is critical that interest rates on home loans be lowered. Lower interest rates increase demand for residential real estate while making house finance more accessible. More affordable financing choices for developers may serve as a catalyst for developing new housing developments and draw more capital into the market," Bijay Agarwal, MD of Bengaluru-based Sattva Group said.
Credit-Linked Subsidy Scheme needs a revamp
The prime objective of the Pradhan Mantri Awas Yojana - Credit Linked Subsidy Scheme (CLSS) is to help the urban poor population by increasing institutional credit flow to meet their housing needs.
To further stimulate the housing sector, it is crucial to reinstate the PMAY CLSS under the Housing for All mission, particularly for the LIG/EWS sectors, experts say. "The old definitions of Economically Weaker Section (EWS) and Lower Income Group (LIG) need to be adjusted for inflation, raising the EWS limit to Rs 4.8 lakhs and the LIG limit to Rs 9.2 lakhs per annum from the current Rs 3 lakhs and Rs 6 lakhs, respectively.
Additionally, the housing size should be increased to 60 square meters for EWS and 90 square meters for LIG," Manish Jaiswal, Managing Director and Chief Executive Officer at Grihum Housing Finance Limited added.
Other expectations
Market experts demand extension of tax benefits under 80EEA which was applicable for loans availed till March 2022 and increasing the current capping of Rs 1.5 lakh. Section 80EEA provides extended tax deductions of up to Rs 1.5 lakh for first-time homebuyers in India.
Badal Yagnik, Chief Executive Officer, Colliers India said that a 100 percent tax holiday for affordable housing projects under Section 80IBA can be re-introduced to boost the developer sentiments. The newly added section provides for a 100 percent tax holiday on the profits from developing and building affordable housing projects.
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