Bud­get 2017: Here’s how home­buy­ers will ben­e­fit from govt’s thrust on af­ford­abil­ity

In­fra­struc­ture sta­tus for af­ford­able hous­ing will make homes cheaper and give buy­ers more op­tions as new launches in­crease

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - Van­dana Ram­nani van­dana.ram­nani@hin­dus­tan­times.com ■

As an­nounced in the Bud­get, in­fra­struc­ture sta­tus for af­ford­able hous­ing will be a good thing for the mid­dle class as it will make homes cheaper and spa­cious. This will be made pos­si­ble by laws which will make it manda­tory for fi­nan­cial in­sti­tu­tions to lend to de­vel­op­ers of af­ford­able projects – and that too at low rates. De­vel­op­ers will in all like­li­hood pass on the ben­e­fits to home­buy­ers. Mea­sure­ments of the hous­ing units have been spec­i­fied, so ex­pect big­ger and bet­ter ‘bud­get’ ac­co­mo­da­tion

De­vel­op­ers so far re­luc­tant to touch the af­ford­able hous­ing seg­ment de­spite high de­mand are likely to be at­tracted by the easy ac­cess to cap­i­tal at lower (be­cause of af­ford­abil­ity) rates and tax in­cen­tives. Even big brands will now be en­cour­aged to get into this seg­ment.

The months af­ter June are likely to see a mo­men­tum in a mar­ket se­verely im­pacted by de­mon­eti­sa­tion. More af­ford­able launches might hap­pen, giv­ing peo­ple more in­vest­ment choices, es­pe­cially in the Delhi NCR ar­eas. De­pend­ing on the lo­ca­tion and cost of land, hous­ing units in these projects are roughly es­ti­mated to cost any­thing be­tween ` 15 lakh to ` 25 lakh.

De­vel­op­ers can take in­fra­struc­ture fund­ing from fi­nan­cial in­sti­tu­tions at a rate lower than 10% for con­struct­ing af­ford- able hous­ing. With bor­row­ing costs go­ing down, the ben­e­fit will def­i­nitely be passed on to the home­buy­ers, says Pradeep Ag­gar­wal, co-founder and chair­man – Sig­na­ture Global, a com­pany that al­ready launched 7,000 units in Gur­gaon and Sohna un­der the Haryana af­ford­able hous­ing scheme.

The in­fra­struc­ture sta­tus pro­posal is likely to im­pact all projects un­der con­struc­tion. Builders are likely to quickly move to com­ply with the af­ford­abil­ity re­quire­ments – lim­it­ing the size of hous­ing units to 60 sq m (car­pet area), de­vel­op­ing projects within 25 km of the mu­nic­i­pal lim­its of four metro cities.

“All these projects will now qual­ify as in­fra­struc­ture and get easy ac­cess to fi­nanc­ing. While ex­ist­ing buy­ers will now be as­sured of timely com­ple­tion, new buy­ers and new launches may re­ceive some re­lax­ation in terms of pric­ing. Some buy­ers will also now qual­ify for the Prad­han Mantri Awas Yo­jana sub­sidy,” says Manoj Gaur, man­ag­ing di­rec­tor, Gaur­sons In­dia.

Cur­rently most states have their own af­ford­able hous­ing poli­cies. In Haryana, ex­ter­nal devel­op­ment charges (EDC) and in­ter­nal devel­op­ment charges (IDC) are ex­empt while in Ut­tar Pradesh EDC/IDC charges, land use charges, ser­vice tax and stamp duty charges are waived off. As for hous­ing unit size, don’t ex­pect pi­geon­holes as the gov­ern- ment has clearly spec­i­fied that in­stead of built-up area (which in­cludes pub­lic space for lifts and cor­ri­dors in a build­ing) the car­pet (wall to wall) area of 30 and 60 sq m would be con­sid­ered.

The 30 sq m mea­sure­ment is ap­pli­ca­ble for af­ford­able hous­ing projects lo­cated in the four metro cities while a limit of 60 sq m will ap­ply for projects lo­cated within a dis­tance of 25 km from the mu­nic­i­pal lim­its of these four main cities.

The de­mand for af­ford­able homes is likely to in­crease given the ex­tra cash peo­ple will have in hand due to pro­posed de­duc­tion of the in­come tax rate to 5% for tax­pay­ers earn­ing less than ` 5 lakh.

Added to this will be the in­ter­est sub­ven­tion of 4% and 3% on loans of up to ` 9 lakh and ` 12 lakh, re­spec­tively, as an­nounced by the prime min­is­ter in his New Year eve’s speech for some peo­ple. “The real es­tate mar­ket is likely to see max­i­mum launches in the af­ford­able hous­ing seg­ment. There will also be a struc­tural shift in pric­ing and not a price cut. The ben­e­fits that builders will get un­der the scheme in­clude a profit tax hol­i­day which means that they will not have to pay tax on the prof­its earned from these projects. More builders will thus en­ter this seg­ment. This will en­sure that buy­ers will get more hous­ing op­tions,” says Sa­man­tak Das, chief econ­o­mist and na­tional di­rec­tor- Re­search, Knight Frank (In­dia) Pvt Ltd.

They will also get five years to com­plete the project in­stead of three years at present out of which max­i­mum time goes into get­ting ap­provals. Get­ting pri­or­ity sec­tor lend­ing will get builders more funds at rea­son­able rates and these ben­e­fits they may pass on to the cus­tomers,” he says.

To cite an ex­am­ple, if a 60 sq m apart­ment in Greater Noida today is cur­rently priced at ` 3,500 per sq ft (around ` 27 lakh), the same unit un­der the scheme will now be 30% more spa­cious (around 800 sq ft with car­pet area be­ing taken into ac­count) and cost much less be­cause of the tax hol­i­day ben­e­fits be­ing of­fered to de­vel­op­ers.

The gov­ern­ment has also ex­tended the time of com­ple­tion of such projects from three years to five years. Builders who do not com­plete projects on time will not get the in­cen­tives.


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