Created on 05.02.2017 18:55:03


Union Budget 2017 will go a long way in the development of affordable housing and in making them more affordable for end users.

In fact, it has addressed the complete cycle from supply to demand of the segment. On the one hand, it met the long-pending demand of the real estate sector to give affordable housing segment infrastructure status, which will help bring down the cost while, on the other hand, it also improved upon the definition of affordable housing units to make them more popular among buyers.

The Budget has further increased the repayment period of loan under Pradhan Mantri Awas Yojana (PMAY) with huge interest subsidy, from 3 percentage points to 6.5 percentage points, and from 15 years to 20 years. Now, this will make it very attractive for a middle-class person to buy a house rather than to live in a rented accommodation.

Getamber Anand, president of Credai, said that both the decisions put together will complete the cycle--infrastructure status will help the developer of affordable housing projects get institutional funding at competitive cost which, in turn, will help reduce the cost of construction.Both would go a long way in bringing down the price of affordable houses, Anand said.

Parveen Jain, president of Nared co, said: “The Union Budget has paved the path for the growth of the industry and the country. While it aims to meet the overall housing target of the government, it also is a step in the right direction. The grant of infrastructure status for the affordable housing segment will now open a plethora of opportunities for real estate development in the country.Not only will the industry be able to attract more funding, the credit offtakes will augment housing supply for both homebuyers and real estate developers, thereby aligning with the goals of the government.“

Earlier, PM Modi gave additional category of subsidies for the neomiddle income groups, on December 31, in which 4% interest subsidy will be available for loans up to Rs 9 lakh and 3% for loans up to 12 lakh, under PMAY, which will boost the demand for housing from the neo-middle income group homebuyers.

Commenting on these tax incentives and the Union Budget for 201718, Rajeev Talwar, chairman of Naredco, said: “The provisions for the sector will help in reducing the costs for developers and also attract investments to the affordable housing segment. Infrastructure status will lower the borrowing cost for developers and will also simplify the regulations in the country to directly borrow foreign debt. As a result, the sector will be able to attract enough liquidity for construction of affordable housing.“ On the whole, we believe it's an extremely well-balanced and progressive Budget, based on the vision of `Transform, Energise and Clean [TEC] India' with a strong focus and clarity on key themes of rural India and farmers, youth and employment, development of underprivileged, prudent fiscal management, housing and real estate, taxation and infrastructure,“ Kapil Wadhawan, CMD of DHFL, said.

Anil Sachidanand, MD & CEO of Aspire Home Finance Corporation Limited, said that infrastructure status to affordable housing will increase supply of houses in the price range of Rs10-40 lakh with corporate houses, builders, and developers refocusing their business in this space. “I expect housing prices to come down by 5-10% in this space, as supply will improve with mass townships and large projects coming in the affordable space.“

This will help these projects in availing credit at retail and at the project implementation level at lower rates, thereby helping increase the housing stock at competitive prices. This will not only benefit end users in this segment, it will also help contain prices in other segments too.

Gagan Banga, vice-chairman and managing director, Indiabulls Housing Finance, said: “The government is on a fast track mode--building a sustainable ecosystem for both developers and homebuyers. With the infrastructure status bestowed upon the affordable housing segment, the cost of borrowing is expected to reduce for developers, thereby boosting the supply of affordable housing in the country.“

The new proposal to in The new proposal to increase the period to complete affordable housing projects to 5 years, from 3 years at present, to qualify for tax exemption on the profit earned by developers by implementing the project under Section 80IB is also a big relief and will make it more practical and attractive for developers, said R K Arora, chairman of Supertech.

As it is normally difficult to complete a project within 3 years, developers avoided launching large projects under the affordable scheme to get the tax concessions. But, now, as the completion period has been increased to five years, the bottleneck to launching large projects has been removed.

The decision to change the criteria to measure the area of an affordable house, from built-up area to carpet area, will also go a long way in making these projects attractive, says Amit Bhagat, MD and CEO of ASK Property Investment Advisors.

Thus, the definition of affordable houses in areas like Noida, Gurgaon, Ghaziabad, Sonipat, and Faridabad in the Delhi NCR, will qualify for 600 sq ft carpet area. As builders cut around 25% of the built-up area to arrive at carpet area, construction of a 2BHK of 800 sq ft will get all the benefits of affordable housing in most of the areas in the country. A developer said that most of the flats in this scheme will be priced in the range of Rs 35 lakh to Rs 60 lakh, depending on the area.

As other factors in constructing these flats improve substantially, with the construction of a project with units up to around 900 sq ft coming under infrastructure sector with 80 IB benefit, the supply at competitive cost will increase substantially. Getamber Anand said that the Budget, thus, addressed both the supply side and demand side of the real estate sector in the country.

This alone will bring most of the 2BHK houses into the affordable segment in the peripheral areas in metros and other cities like Bengaluru, Pune, Hyderabad, Ahmedabad, and Lucknow.

Pankaj Bansal, director of M3M Group, said: “The decision to change the definition of affordable housing will now make it more practical to build and market.We can now focus on building more affordable housing projects; rural housing too will get a big push.

“The borrowing cost for homebuyers has already come down significantly.“ “Budget 2017-18 clearly indicates that the government is serious in achieving the objective of `Housing for all by 2022'. The other positive steps to revive the real estate in the Budget are additional refinance of Rs 20,000 crore through NHB. This is good news for developers and investors in real estate projects,“ Arora added.

The new Credit-Linked Subsidy Scheme for MIG with the allocation of Rs 1,000 crore in the Budget will also revive demand. Credit schemes like the subvention of 6.5 percentage points on loans up to Rs 6 lakh, subvention of 4 percentage points on loans up to Rs 9 lakh, and further that of 3 percentage points on loans up to Rs 12 lakh will amount to a net discount of around Rs 2 lakh on the total loan.

Not only this, the Budget has increased the repayment period from 15 years earlier to 20 years now. The subvention will lead to lowering of the EMI by around Rs 1,700 per month or Rs 20,500 per annum. This will improve the affordability of middle-class buyers substantially.

“While the finance minister has made some positive provisions in the Budget for the sector, they are not sufficient to revive the market,“ M R Swaraj, MD of OSB Group, said.

The lowering of the holding period for built-up properties for availing long-term capital gains, from 3 years to 2 years, will also improve the sentiment of investors in the real estate sector. This will make investment in housing projects more liquid.

Sunil Mishra, chief strategy officer at PropTiger, said that long-term capitals gains tax benefit, which could be availed after three years, can now be availed after two years and will please investors and homebuyers alike.



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