The future of the real estate sector is in affordable housing, says Rohit Poddar, MD, Poddar Housing.
The affordable housing sector is looking and feeling upbeat! The sector has been finally granted infrastructure status, in addition to interest rate subsidies through the PMAY scheme, the income-tax breaks have been extended effectively till 2024 and finally the government has moved the idea of providing regulatory and construction approvals within 60 days.
This is of course a state subject, but if there is pressure from the Centre to act on the same, then the chances of it actually happening are far greater. This sector is in dire need to create affordable housing stock so that the 'Housing for all' by 2022 vision of our Prime Minister is realised.
It's a very tall order as the affordable housing shortage in urban India is about 20 million units; and an additional 40 million units in rural India. It's the biggest housing shortfall for any nation on Planet Earth.
Hence, given such a supply shortfall, the need of the hour is to create a mass movement amongst the developer community for serious participation from them, which has so far been woefully lacking. The grouse has been that why should a traditional developer enter a segment which has very low margins, and where it still takes as much time to get approvals as a regular construction project?
The cost of carrying capital becomes so high over a two-three year period that it is not financially viable to execute and deliver an affordable housing project, and hence it was very necessary for the government to decide on a 60-day clearance process for projects.
We hope that this suggestion becomes a law in the next few weeks.
The infrastructure status tag will enable the creation of much needed liquidity in the sector as now developers can raise ECBs, NCDs, and other structured debt options at cheaper rates. Additionally, banks will be willing to lend for construction finance more easily to a sector which is a priority sector, in addition to its infrastructure status. The income-tax holiday (with applicable MAT) has been in effect extended for projects that are approved up to 31st March 2019, and the time-frame for project completion is five years. Hence in effect, a project can be completed by 30th March 2024.
The size of apartments has to be below 60 square metres of carpet area to avail of the tax-free status (with applicable MAT) for locations outside the four metros and 30 square metres for locations within the municipal limits of the metros - this is an excellent clarification as the old rule was on built-up area and not carpet area. There was already a subsidy of approximately Rs 2 lakh under the PMAY scheme and an additional interest subsidy of 3 per cent for loans up to Rs 12 lakh and 4 per cent for loans up to Rs 9 lakh; for the first time a scheme for home buyers under the PMAY scheme has also been announced.
The National Housing Bank has announced a Rs 20,000 crore interest subvention package for the year 2017-2018 for affordable housing projects and hence housing finance companies will be able to provide faster and cheaper home loans to customers. In Maharashtra and for Mumbai, a housing policy for affordable housing is yet to be announced. We hope that this is done soon.