MC Explains: Why has Haryana govt amended its affordable housing policy?

Haryana government has decided to approve an amendment in the Affordable Housing Policy-2013, under which the allotment rates for the apartment units have been increased by 20 percent.

Will the Haryana government’s decision to approve an amendment in the Affordable Housing Policy-2013, under which the allotment rates for apartment units have been increased by 20 percent to Rs 5,200 per square foot, encourage developers to undertake more affordable housing projects? Developers have long complained that the rate of Rs 4,200 per square foot fixed for the scheme was making projects unviable due to rising construction and land costs.

Real estate experts said the move was long overdue as the cost of construction has gone up after the pandemic making it unviable for organised developers to undertake affordable housing projects even though there is sustained demand for them.

“The basic input costs (steel, cement, etc) and the overall cost of construction had gone up considerably over the last few years. More so, even the land cost had risen in the last few years amid high overall housing demand,” said Santhosh Kumar, Vice Chairman - ANAROCK Group.

This move will in some sense help developers to consider launching affordable housing projects given that demand in this category is always there, he added.

Affordable housing is controlled development – size, design, cost and selling price – are all controlled. This category requires a long-term vision and financial wherewithal to construct a large number of units that only a few organised developers can do. It also requires the use of modern construction technology.

“Therefore, it was more of a developer issue rather than a market issue. Demand was never a problem. This decision will help developers get the required breathing space and build more. This, in turn, will provide a fillip to new affordable housing supply priced between Rs 16 lakh and Rs 25 lakh,” said Mudassir Zaidi, Executive Director - North, Knight Frank India.

Pradeep Aggarwal, founder and chairman, Signature Global (India) Ltd, said higher rates will encourage developers to undertake more affordable housing projects, increasing the supply of affordable homes.

"We applaud the recent amendment in the Affordable Housing Policy-2013, which is a game changer for the sector. The increase in rates for hyper and high potential zones like Gurugram, Faridabad and Panchkula by Rs 800 per sq ft on the carpet area makes affordable housing projects more viable for developers,” he said.

Some experts, however, said the move may make affordable housing expensive for homebuyers.

All about the policy

As per the amendment, the allotment rates for apartment units under affordable group housing projects across Haryana have been increased on an average by 20 percent from previous rates. Accordingly, the rates prescribed for the hyper and high potential zone (Gurugram, Faridabad, Panchkula, Pinjore-Kalka) in clause -5(i) of this policy have been increased by Rs 800 per sq ft on carpet area to Rs 5,000.

For other high and medium-potential towns, it is proposed that Rs 700 per sq ft on carpet area may be increased due to moderate demand to encourage developers to come up with new projects. For low-potential towns, Rs 600 per sq ft on carpet area has been increased.

The rates will be made applicable on all licences which are yet to make allotments, the government statement said.

The Affordable Housing Policy was notified by Haryana’s housing department on August 19, 2013. This policy is intended to encourage the planning and completion of group housing projects wherein apartments of "pre-defined size" are made available at "pre-defined rates" within a "targeted time-frame" as prescribed under the present policy to ensure increased supply of affordable housing in the urban housing market for deserving beneficiaries.

According to the government statement, the rate of balcony has been increased by Rs 200 per sq ft to Rs 1,200 per sq ft, so that the required construction cost could also be recovered by the developers through balcony by increasing its rate.