Two additional categories were introduced under the Pradhan Mantri Awaas Yojana (PMAYUrban) for interest subvention.
Under this, home loans up to lakh taken in 2017 will receive interest subvention of 4%, while those up to lakh will get interest subvention of 3%. This will be over and above the 6.5% interest subvention on home loans up to lakh already available in PMAY.
The announcements are expected to give a boost to the construction and housing sectors.
“It will help tap the potential housing demand. It will also help generate employment in the sector, which will ultimately lead to further demand growth in the budget and affordable housing segments. But as the focus is only on budget housing, these steps wouldn’t help absorbency of the current large unsold housing inventory with the builders. Most of the supply, at present, is in high-end realty products,” says RP Malhotra, a Panchkula-based builder.
The missing element
For long, private sector developers have ignored housing supply expansion in the budget and affordable se gments. Most housing supply is concentrated in the mid-price segments, and a sizeable portion caters to luxury segments. Developers blame government regulations regarding FAR (floor area ratio), density and coverage area; and lack of incentives for the private sector to increase supply for the budget and affordable segments.
Welcoming the announcements, Parveen Jain, the president of NAREDCO (National Real Estate Development Council), said, “Rural housing construction under PMAY has got momentum but urban housing is still struggling because of complexities of land acquisition, lack of infrastructure and nonavailability and affordability of housing finance from a recognised banking channel. Government announcement of interest subvention on home loans up to R12 lakh will be a relief to lower income group (LIG) and the neo-middle class.”
But, he added that developers should also be given incentives for encouraging affordable housing in the urban centres. “Private sector developers, with some flexibility in planning, execution and marketing along with incentives in taxation will be of great help in meeting the housing shortage in the urban areas,” he said.
Realty experts also felt that the PM’s announcement regarding the interest waivers have left several questions unanswered. “The Budget should give more clarity on the actual definition of beneficiaries who can avail of these benefits. For example, would young urban professionals hoping to buy their own apartments but not belonging to either the EWS or the LIG segments be allowed similar subventions? Also, af fordable housing is largely available in the fringe areas of metros and tier-II, III cities. Will certain redevelopment projects within metros meeting the affordable housing definition be granted similar benefits?” says Anuj Puri, chairman and country head, JLL India.