CREDAI’s new leadership pitches for hike in Rs 45 lakh affordable housing cap, better home sales data

CREDAI's national president Shekhar Patel addressing the crowd at CREDAI's changing of guard event

The new leadership of the Confederation of Real Estate Developers' Associations of India (CREDAI) said that while it does not object to the Union government's definition of affordable housing based on size, the current price cap of Rs 45 lakh should either be lifted or linked to the Reserve Bank of India's All-India House Price Index (HPI). The new President, Shekhar Patel, heads the Ahmedabad-based real estate firm Ganesh Housing Corp Ltd.

Patel took over as president from Rustomjee group MD Boman Irani, who now moves into the chairman's position at India's leading developers' advocacy group. The leadership transformation was sealed at an event in Gandhinagar on April 18, with the event being chaired by Gujarat Chief Minister Bhupendra Patel.

In an interaction with Moneycontrol on the sidelines of the event, Shekhar Patel said that there is enough supply in both Tier-I and Tier-II cities in affordable housing according to the mandated sizes — 60 square metres for Tier-I cities and 90 square metres for everywhere else, but the prices exceed the Rs 45 lakh cap that makes it eligible for affordable housing benefits, such as concessional goods and services tax (GST) rates — 1 percent for under-construction affordable homes, as well as Pradhan Mantri Awas Yojana (PMAY) benefits.

"If someone buys a 600 square feet house in Mumbai and still has to pay more than Rs 1 crore for it, that is not paying for a luxury house. Our request is that the Rs 45 lakh be removed so that more people can avail of the GST benefit of 1 percent. It is not that the affordable housing sector is struggling. Around 70 percent of the launches in Ahmedabad are under 90 square metres, but they don't qualify as affordable housing because of their prices. The Rs 45 lakh cap came in only in 2017, and since then, the price of a Rs 45 lakh house has gone up to Rs 75-80 lakh, going by the RBI's House Price Index," Patel said.

Rising prices

The RBI publishes the HPI every quarter, covering most major cities in India. In the most recently-released HPI for October-December 2024, the index increased 3.1 percent year on year. Patel, as well as other CREDAI office bearers, argued that with the increase in input, labour, and regulatory costs, as well as regular inflation, the Rs 45 lakh-cap for affordable housing is not sustainable, and should be removed or increased in order to provide a fillip to the segment.

Asked about his priorities for the sector, Patel laid out a plan for a data analytics hub by CREDAI, which will collate information from sources such as state-level Real Estate Regulatory Authorities (RERAs) and state revenue departments in order to accurately gauge sales and registration data from time to time.

Most real estate sales and leasing data in India is sourced from property consultancies, which vary in their research methodologies, sample size, and the number of markets covered. Patel also said that CREDAI will continue its skill development project to provide more skilled labour for India's construction sector.

GIFT City prospects

On Gujarat's real estate prospects, Patel said that the Gujarat government's move to further relax prohibition rules at the much-hyped Gujarat International Financial Tec-City, or GIFT City, is expected to benefit the real estate segment. Much of the 16 square km GIFT City remains under construction or vacant, with some observers pointing to the lack of social infrastructure — educational institutions, food and beverage outlets, among others — as being detrimental to attracting more talent, besides Gujarat's decades-long prohibition policy.

"It is not that young people want to drink every day, but they need to live a life that does not have restrictions such as prohibition. It is important for the age group that is there at GIFT City, generally between the ages 21 to 35 years, to be able to socialise with their friends and colleagues. This easing will definitely help the sector over time," Patel added.

Developers such as Adani Realty, Brigade Enterprises, Sobha, and others, have invested in buying land and setting up commercial and residential projects at GIFT City, both in the domestic tariff area and in the SEZ component. Local developers have also lined up projects in the area, according to observers.

The Gujarat government had allowed liquor sales in December 2023, albeit only for permanent employees and their visitors. With the most recent amendment to its rules, companies present in GIFT City and their employees have more control over liquor permits and visitors permitted in each permit.

(Disclaimer: The reporter was in Gandhinagar at the invitation of CREDAI)