PMAY pro­vides only 2%-10% ben­e­fit on prop­erty pur­chase

AF­FORD­ABLE CAP Higher ben­e­fit at lower ticket sizes. More builders to launch homes of up to 60 sq m car­pet area

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - HT Es­tates Cor­re­spon­dent ht­es­tatesi@hin­dus­tan­

The gov­ern­ment’s re­cent ini­tia­tives such as the Prad­han Mantri Awas Yo­jana will pro­vide lim­ited ben­e­fits to MIG hous­ing and more to LIG hous­ing. Mak­ing homes more af­ford­able would be a greater cat­a­lyst for in­creas­ing medium-term de­mand for hous­ing and mort­gages, says an anal­y­sis by Ko­tak In­sti­tu­tional Eq­ui­ties.

In or­der to cap­ture such de­mand and in­cen­tives, de­vel­op­ers need to of­fer com­pact prod­ucts at lower ticket sizes and hous­ing fi­nance com­pa­nies need to fo­cus on loans of be­low` 20 lakh. The credit-linked sub­sidy scheme (CLSS) un­der PMAY will help re­duce the IRR (in­ter­nal rate of re­turn) on home loans by about 100 bps or im­ply 2-10% dis­count on pur­chase of new prop­erty, higher ben­e­fit at lower ticket sizes. The scheme alone may not be a cat­a­lyst for mak­ing a pur­chase de­ci­sion; bet­ter em­ploy­ment op­por­tu­ni­ties and im­prov­ing af­ford­abil­ity will have to play a greater role, it says.

CLSS has been ex­tended to in­clude the mid­dle class al­though ben­e­fits are low at the higher-end. The fine print of the CLSS has pro­vided an in­come cap of R18 lakh for bor­row­ers to qualify un­der the CLSS in the MIG seg­ment. As per the cur­rent scheme for the LIG seg­ment, bor­row­ers of home loans up to R6 lakh are el­i­gi­ble for 6.5% in­ter­est sub­sidy for 15 years. The MIG seg­ment will be in­cluded in this scheme from fi­nan­cial year2018 to pro­vide 4% sub­sidy for loans of up to ` 9 lakh and 3% for loans of up to ` 12 lakh.

In­ter­est sub­sidy is cred­ited up­front to the loan ac­count of ben­e­fi­cia­ries through lend­ing in­sti­tu­tions (banks/HFCs) re­sult­ing in re­duced ef­fec­tive loan li­a­bil­ity. The cal­cu­lated sub­sidy for loans across cat­e­gories is ` 2.3 lakh. This ben­e­fit is only avail­able to first-time buy­ers. The CLSS for the MIG saves around 5-8% on ` 3-4 lakh /unit home. With in­creas­ing ticket size, the im­pact of such sub­sidy re­duces.

While house­hold in­come cap of ` 18 lakh per an­num can al­low buy­ers to pur­chase units of ` 70 lakh to ` 90 lakh, the ben­e­fits of the sub­sidy are not much, lim­ited to just about 3%.

Most units of­fered by listed de­vel­op­ers in met­ros are above

` 50 lakh and hence the ben­e­fits of such schemes are lim­ited. More de­vel­op­ers are ex­pected to launch homes of up to 60 sq m car­pet area in the fi­nan­cial year 2018 to gain ben­e­fits un­der 80-IBA, which could in­crease vol­umes; but value con­tri­bu­tion will be lim­ited con­sid­er­ing the share of such units to the over­all area un­der con­struc­tion.


Bet­ter em­ploy­ment op­por­tu­ni­ties and mak­ing homes cheaper will play a greater role in pro­mot­ing af­ford­able hous­ing.

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