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In order to ‘provide a further impetus’ towards ‘housing for all’ and affordable housing,  Finance Minister Nirmala Sitharaman proposed an additional deduction up to Rs. 1.5 lakh for interest paid on loans borrowed up to March 31, 2020 for buying an affordable house valued up to Rs. 45 lakh in this year’s Budget.

Harshavardhan Neotia, Chairman, Ambuja Neotia Group, told BE in this context, “This is expected to drive sales and bring fence-sitters into the market.” A tax holiday has also been proposed on the profits earned by developers in the affordable housing segment. Prabir Roychowdhury, Director, Banyan Tree Group, said, “The government budget proposals have played an important role in improving the situation of the affordable housing segment.”

Housing market

The government has also allowed 100% Foreign Direct Investment (FDI) for townships and settlements development projects. According to an IBEF report of March 2019, in order to boost affordable real estate, housing loans up to Rs. 3.5 million ($ 54,306) in metro cities were included in priority sector lending by the RBI in June 2018. Loans under priority sector lending are relatively cheaper. Home loans in India had increased by 17.1% year-on-year in the October-December quarter of 2018. India is among the top 10 price appreciating housing markets internationally and the residential segment contributes 80% of the real estate sector. According to reports, housing launches across top eight Indian cities increased by 75% in 2018 to reach 182,207 units.

Practical approach

In spite of the above mentioned statistics, the entire Indian real estate market is reportedly witnessing a very high inventory pile up. Neotia added, “India needs to come up with relevant projects - with realistic pricing and sizing.”

The 21st century customers prefer pocket and communication friendly lifestyle enhancing projects. As per a 2018 Bulletin of Reserve Bank of India, there has been a huge gap in demand and supply of urban housing in India. The Economically Weaker Sections (EWS) and Low Income Group (LIG) accounted for 96% of the total housing shortage in India. This mandates a vigorous focus on affordable housing. 

Environment-friendly housing

Environment-friendly housing is also a key concern in today’s world. India needs more such housing projects. Alternative power generation methods and usage of fly ash bricks needs to be emphasised. Prabir Kumar Bagchi, Director, Superstruct Infracon Private Ltd, a company that manufactures fly ash bricks, told BE, “It would not be an under-statement to state that in spite of a few percentage increment of the usage of fly ash bricks in the real estate sector, it is still quite low as compared to the usage of clay bricks in West Bengal.  There are government incentives on usage of fly ash bricks but more aggressive steps are needed to popularise this product among the real estate sector.” Apart from being an environmentally viable alternative, its wide usage may lead to reduction of input costs and that benefit may be passed onto the consumers in form of lowered prices. In a roundabout way, its wide acceptance may actually push sales in the affordable segment as it will pull down prices.

Signs of recovery

Nirmala Sitharaman had last year announced a special window of Rs. 10000 crore to boost affordable and middle-income housing. According to recent reaction from Sitharaman, “The government will make funding available for net worth positive housing projects that are not in a bankruptcy process or classified as non-performing assets (NPAs).”

According to many industry insiders, the housing market is slowly showing signs of recovery. The stabilisation of key policy reforms such as implementation of GST and RERA has also helped in improving consumer confidence. Governmental support to the affordable segment will auger well for the overall real estate sector.

Recently, Sitharaman had informed the media, “The government is very keen and is working very clearly together with the RBI to see how best we can, where necessary, tweak the existing norms to help the people who are affected in the realty sector.”

The government has recently proposed an exclusive alternate investment fund (AIF) for the real estate sector with a corpus of Rs. 15000 crore, more inclusive terms and a commitment to continue to provide more budget funds, in addition to the initial Rs. 10000 crore, as and when demand arises.

A recently released press communique from the finance department has advised home-buyers to approach lenders for additional borrowing or for the revival of their loans. The special window or AIF is targeted towards the completion of 1600 projects, comprising about 4.58 lakh units. The efficient implementation of this policy will improve the affordable real estate segment in India.