The rapid urbanisation, coupled with young demographic profile of the growing population , promises healthy demand for affordable housing, which according to rating agency ICRA, has a market potential of Rs 6.25 trillion by 2022.
Considering that the maximum shortage of urban housing is in the low- cost segment, the government has rightly put focus on this to realize its flagship mission of ‘Housing For All’ . As a result of that low-cost /affordable housing has come up as a major driving force , promising to hasten the revival of real estate.
In order to provide the much needed push to affordable housing, the government is focusing on both the demand and supply side. For augmenting demand, the government announced the Credit Linked Subsidy Scheme (CLSS) for housing loans for EWS and low- income group under the Pradhan Mantri Awas Yojana (PMAY), with interest subvention to avail the benefit of the CLSS. Also, the GST on affordable and low-cost housing units was lowered in order to increase the affordability of homes. It is also significant to mention that there is zero GST if someone buys ready home.
The government is working on a multi- pronged strategy to help boost affordable housing. As part of this strategy, the government is working to help developers contain the cost of affordable homes by reducing the approval time for projects. The central government is also working with states to see that they take to online working, in order to ensure transparency and accountability, with corruption- free environment, leading to faster approvals.
Real Estate Regulation Act (RERA) has given boost to housing sector by checking diversion of funds and ensuring timely completion of projects to boost supply. But various challenges still remain on ground under ‘Housing for All’ by 2022. Banks are reluctant to lend to developers while sourcing capital from NBFCs and PE funds is costlier, especially for affordable housing where margins are thin. Therefore, there is a need to come up with a policy for subsidized funding to developers of affordable housing, along with a provision to fund land which forms a major component of project cost. Lowering stamp duty to improve affordability, will further help give boost to affordable housing and realize the mission of ‘Housing for All’.
