Affordable Housing Boost: A win-win for Developers & Buyers

With a slew of measures announced in the Union Budget 2017-18, market sentiments seem to be heading northwards.Thanks to the infrastructure status given to the affordable housing segment. The move is likely to attract larger investments in the sector by making funds available at relatively lower cost to developers.

Last year’s budget gave 100 per cent deduction on profits for housing projects building homes up to 300 sq. ft .in the four metro cities and 600 sq. ft. in other cities. In this Budget, government clarified that the basis for this benefit will be carpet area and not built-up space.

The change from built-up area of 30 / 60 sq. mt. to carpet area of 30/60 sq. mt. for affordable housing will make the low cost – housing segment more lucrative for the developers.

Now, as per a report on “Indian Mortgage Finance Market Update for FY 2016’ by ICRA, the total loan book of the all players in the affordable housing segment stood at Rs 957 billion as on March 31, 2016 indicating a growth of 28% during FY 2016. In ICRA’s opinion, opportunities for growth are high for the segment given the current low penetration levels as well as the government thrust on the affordable housing segment.”

It will be interesting to see how affordable market takes-off in the coming months. Several developers have already started to explore this segment. For instance, post the budget session, Sunteck Realty is planning to form a new vertical to explore affordable housing segment. The developer is planning to invest up to Rs 1,000 crore over the next two years to develop projects in locations such as Thane, Kalyan, and Navi Mumbai. Oberoi Realty, Lodha and the Prestige Group are also planning to enter this segment.

Mahindra Lifespaces, Tata Housing, Shapoorji Pallonji Group, Assetz Property Group, and VBHC Value Homes Pvt. Ltd are few of the leading developers in the country that have already ventured into this segment.

If we closely look at 2016 new launched units, affordable housing can be clearly seen dominating the market segmentation. The simple demand and supply law explains it well. While there a few buyers who are opting for plush residences, for majority of India’s populace owning a home is still a distant dream. Thus, the demand for affordable housing is huge. And taking a cue from this, prominent developers have already started cashing on this.

It wouldn’t be wrong to say that it is a win-win for both the developers as well buyers.

For Developers: Developers building low-cost housing will be eligible for a slew of incentives, tax benefits, and institutional funding.This include 100% deduction of the profits if the project is approved by the competent authority before the 31st March, 2019 with all the requisite conditions met.

For Buyers: Buyers will now get more spacious homes. Additionally, with private players entering this segment, buyers are likely to get better quality and finish homes unlike the ones provided by the development authorities.

The road map looks clear. The current government is already halfway through their tenure and the ambitious goal of “Housing for All by 2022” remains their top priority. So, will this year be a game changer for the affordable housing segment?

Well, while it’s too early to comment on it but we can definitely hope for the best!

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