Sops, Cheap Loans to Make Af­ford­able Hous­ing a Re­al­ity

Bud­get pro­pos­als have given the fi­nan­cial un­der­pin­ning to de­liver on PM’s poll promise

The Economic Times - - Companies: Pursuit Of Profit - Kailash.Babar@ times­

Mum­bai: In­dia’s long-pend­ing so­cial ob­jec­tive of af­ford­able mass hous­ing ap­pears to be fi­nally do­ing just that: Get­ting mil­lions of its wage earn­ers on to the prop­erty lad­der for the first time.

‘Hous­ing for All’ was the corner­stone of PMNaren­dra Modi’s eco­nomic well-be­ing plank an­nounced in 2015, un­der­scor­ing the im­por­tance of home own­er­ship in en­hanc­ing so­cial se­cu­rity in the South Asian na­tion that plans to build about 20 mil­lion homes in the next 5 years.

The stated ob­jec­tive now has the fi­nan­cial un­der­pin­nings to help turn the slo­gan into re­al­ity: Soft loans, likely in­ter­est-pay­ment waivers, ac­cess to in­sti­tu­tional cap­i­tal for cheaper homes, and tax-breaks are levers ex­perts be­lieve will match costs and wages.

“The govt’s ini­tia­tives to­ward en­sur­ing progress for the ‘ Hous­ing For All’ and Prad­han Mantri Awas Yo­jna (PMAY) plans have en­sured con­ver­gence of home loan EMIs (equated monthly in­stal­ments) and rent che­ques, which will be a big trig­ger to boost de­mand. The in­fra­struc­ture sta­tus tag will also en­sure greater money flow and en­sure home loan rates re­main af­ford­able over an ex­tended pe­riod of time,” said Ga­gan Banga, MD at In­di­a­b­ulls Hous­ing Fi­nance.

Bud­get 2017 of­fered in­fra­struc­ture

sta­tus to the busi­ness, sup­ple­ment­ing ear­lier state pro­pos­als to pro­vide in­ter­est sub­ven­tion. In­ter­est sub­ven­tion un­der PMAY will be added ben­e­fits for such home­buy­ers, many of whom make less than the coun­try’s av­er­age per head 2016 earn­ings of about $6,600.

Bud­get pro­posal to ac­cord in­fra­struc­ture sta­tus would en­cour­age com­pa­nies to build more such homes, boost­ing sup­ply and keep­ing prices in check.

“Giv­ing ‘in­fra­struc­ture’ sta­tus to af­ford­able hous­ing is an ex­tremely pos­i­tive step. It will help in re­duc­ing the cost of bor­row­ing for real es­tate de­vel­op­ers, pro­vide eas­ier ac­cess to fi­nance and spur in­vest­ments. This will go a long way in ful­fill­ing the ob­jec­tive of ‘Hous­ing for All’ by 2022. Also, the re­fi­nanc­ing of in­di­vid­ual hous­ing loans of .₹ 20,000 crore by the Na­tional Hous­ing Bank (NHB) will help low-in­come bor­row­ers and hous­ing fi­nance com­pa­nies,” said Renu Sud Kar­nad, man­ag­ing di­rec­tor, HDFC, the coun­try’s big­gest mort­gage lender.

Also, the pro­posal to of­fer tax in­cen­tives for af­ford­able hous­ing based on us­able carpet area — and not built-up space —will help buy­ers get bet­ter-sized homes, bring­ing more projects un­der this cat­e­gory. On New Year’s Eve, the prime min­is­ter an­nounced the gov­ern­ment’s de­ci­sion to pro­vide in­ter­est sub­ven­tion of 3% and 4% for loans of up to .₹ 12 lakh and .₹ 9 lakh, re­spec­tively, un­der PMAY.

This is es­ti­mated to cover a sig­nif­i­cant part of home loans ex­tended by most mort­gage com­pa­nies and boost low-in­come hous­ing in pe­riph­eral ar­eas of ur­ban lo­cal­i­ties across the coun­try.

Ear­lier, un­der the prime min­is­ter's vi­sion of ‘Hous­ing For All by 2022’, the gov­ern­ment had al­ready an­nounced var­i­ous ben­e­fits, in­clud­ing in­ter­est sub­sidy of up to .₹ 2.2 lakh for home­buy­ers in this seg­ment.

“Tax ben­e­fits un­der Sec­tion 80C for home loan prin­ci­pal re­pay­ment, Sec­tion 24 ap­pli­ca­ble to in­ter­est pay­ment and Sec­tion 80EE amounts to .₹ 4 lakh an­nu­ally. This, when com­pared to usual rentals yields of 3%, shows buy­ing a house in af­ford­able or low-cost cat­e­gory is ex­pected to be pre­ferred in­stead of rent­ing one,” said a tax con­sul­tant.

The Union Bud­get 2017 has also ex­tended the pro­ject du­ra­tion to five years from three years for avail­ing tax-breaks, an in­cen­tive ex­pected to boost sup­plies.

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