Inadequate housing is a global concern. According to a United Nations survey, an estimated 1.6 billion people live in inadequate housing worldwide, with a staggering 1 billion people living in slums and informal settlements. To put things in perspective, this means that about one in four people in urban areas is forced to live in conditions that affect their health and safety.
This naturally makes adequate housing imperative for the sustainable growth of cities and communities listed under the UN’s Sustainable Development Goals.
Despite being considered as one of the fastest-growing economies in the world, roughly 60 million urban and rural households in India cannot afford adequate housing. However, the situation is slowly and gradually changing with affordable housing coming into strong focus.
Housing For All Missions
With the launching of the Housing for All Mission by the Government of India in 2015, affordable housing picked up interest among real estate developers as demand for housing grew. Under this programme, the government aimed to provide two crore affordable homes to the urban poor by the end of March 2022. To further attract homebuyers from the middle-income group, the Goods and Services Tax (GST) was reduced. The Pradhan Mantri Awas Yojana (PMAY), launched under the Housing for All Mission, aimed to provide adequate housing for the urban poor with a credit-linked subsidy scheme (CLSS), offering an interest subsidy to applicants of a home loan under PMAY.
As matters stood on December, the Ministry of Housing and Urban Affairs reported that as against the total assessed demand of 1.12 crore houses, 1.14 crore houses have been sanctioned under PMAY (Urban). Of these, a total of 91.5 lakh houses were grounded for construction and 53 lakh houses were delivered by December. A total of 17.35 lakh beneficiaries have availed the subsidy on housing loans through the CLSS.
Thus, Budget 2022’s announcements on affordable housing bear significance in providing housing for all. Finance Minister Nirmala Sitharaman announced the completion of 8 million homes under the PMAY scheme, and an allocation of Rs 48,000 crore under the PMAY (Urban) and the PMAY (Gramin).
Further, the single-window environmental approvals, increased co-ordination between the Centre and states for the approval processes, and a uniform registration of deeds are expected to help the affordable housing market. Sitharaman also proposed working more with regulators so that it will reduce the cost of intermediaries.
Boosting Development
With increasing work from home (WFH) or work from anywhere (WFA) policies, employees have returned to their hometowns or are choosing to buy a second home in tier 2 and 3 cities, thus spiking demand. The past few months also witnessed the trend of new townships in small towns to promote a community-driven lifestyle — a realisation that has been reinforced in the months of the lockdown. Thus, Budget 2022’s focus on developing and modernising tier 2 and tier 3 cities will further accelerate real estate penetration, both residential and commercial.
Urban Planning And Real Estate
To meet the increasing problems arising from urbanisation, the Budget proposes establishing a high-level committee of planners, economists, and institutions to provide recommendations on urban sector policies, capacity building, and planning, which can see an increase in commercial real estate. This can also be expected to address inadequate urban housing, which will drive residential real estate in urban areas.
Commercial Real Estate: Budget 2022’s focus on logistics and infrastructure spending will be of substantial benefit for commercial real estate. The addition of 25,000 kilometres for national highways, multimodal logistics parks, and capacity building for infrastructure projects will reduce logistics cost, propel the manufacturing sector, and ensure a smoother supply chain, thereby promoting sales and consumption, which finally will require more commercial space, increased warehousing needs, and data centre capacity, all of which will drive commercial real estate.
While there has been no tax rebate on housing loan interest to encourage new homebuyers (and hoping there is no increase in the interest), residential real estate continues to clock improved sales due to shortages and growing demand. The concessions and funding announced in Budget 2022 will push the growth figures of residential real estate. Growing housing units in urban areas will also fuel the demand for commercial and retail office space. With the focus continuing to remain on India’s manufacturing and logistics, the commercial real estate segment too has cause for cheer.
Neeraj Bansal is Partner Risk Advisory, and COO - India Global, KPMG India. Views are personal, and do not represent the stand of this publication.
