by Ashish Mahajan
Back in 2015, when Prime Minister Narendra Modi unveiled his bold and ambitious plan to provide ‘Housing for All by 2022’, there were definitely many sceptics in the industry, academia, among the general public, perhaps even within his own party, and certainly in the opposition. However, 3 years on, it seems the PM’s dream may in fact come to be fulfilled. A series of well-timed schemes, regulations and plans are playing the role of finely-cast supporting actors to prop up the leading star – affordable housing. As a result, there is no better time than now to take that leap and become a first time homeowner.
Across the country, young professionals, newly married couples, couples living in joint families and even some older folks who are looking to spend retired life in their own home, are looking to own their own private space. One’s own home is truly a haven – to relax, to celebrate, to aspire and to live life to the fullest. Here are some of the reasons the time is ripe to decide to live in your own home:
The Credit-Linked Subsidy Scheme makes home loan simpler for the urbanite
The Pradhan Mantri Awas Yojana (PMAY) is a state-promoted affordable housing scheme that aims to put a roof over rural citizens across the country, based on their economic status. However, the government realised that families in urban areas struggle just as much to access decent housing. With this in mind the Credit-Linked Subsidy Scheme (CLSS) was launched under the aegis of the flagship PMAY.
Under CLSS individuals with an annual household income of Rs. 6 to Rs. 12 lakh qualify for a subsidy under the MIG-I category at 4% interest. Similarly, individuals with annual income of Rs. 12 to Rs. 18 lakh will qualify for subsidy under the MIG-II category at 3% interest. The eligible loan amounts would be Rs 9 lakh and 12 lakh for MIG I and MIG II category, respectively; loans above these limits would be availed at regular home loan rates.
Recently, the Ministry of Housing & Urban Affairs enhanced the eligibility of houses under CLSS based on the carpet area. For MIG-I, the increase is from 1291 sq. ft. to 1722 sq. ft. while for MIG-II it has increased from 1614 sq. ft. to 2153 sq. ft. This increase brings more families under the ambit of the scheme and widens the scope. The savings amount to as high as Rs. 2.67 Lks which means a discount of over 10% for a house that costs Rs. 25 Lks. Never earlier had anyone dreamt of a Government scheme providing respite for home buying in India.
GST rate slashed for construction projects under CLSS
A reduction of 4% in the GST rate for all construction projects under CLSS will provide further impetus to urban home-buying. Thus, the effective GST rate applicable is now 8% instead of the previous 12%. However, for buyers not eligible under CLSS will continue to pay GST at 12%.
The reduction in GST rate along with the benefits under CLSS is a significant boost to homebuyers and another push towards owning one’s first home.
Lowest home loan rates in over a decade
Thanks to RBI’s easy monetary policy, the capital available to banks costs the least in over a decade. This in turn has made the mortgages more affordable since 2007-08. Interest rates on home loans have come down from the highs of 11-12% to the current 8.5%. Women homebuyers are being wooed by banks and financial companies with even lower rates. As a result we are seeing more home loans being disbursed to women, either for homes for themselves or to the woman of the house, so that the family can benefit from lower interest rates.
Vast land parcels have been unlocked for development
Recently the Mumbai government unveiled the ambitious Mumbai DP 2034 which will see a whopping 3700 hectares of previously untouchable land such as salt pans and No Development Zones, unlocked for development. This has been the theme in various parts of the country, where many state government are earmarking certain land parcels for development of affordable housing.
Private Developers are taking interest in the affordable housing space
A number of developers are keen to enter the affordable housing space, especially given the widened scope of PMAY-CLSS. Some are engaged in PPP mode, developing projects for the government, while some others are developing their own projects. However, a number of regulations and enhancements are needed to be put in place by the government which provides further impetus to private players joining this space. This is necessary to ensure that buyers have better quality homes to choose from.
Affordable housing might be seen as the sunrise sub-sector of the real estate industry. It is becoming more attractive with each new favourable regulation, scheme and proposal, to homebuyers as well as developers. This is important to ensure a dependable symbiotic relationship between both parties. Having said that, the time is ripe for the purchase of one’s first home. In terms of a favourable ecosystem, this is an opportune time.
As someone wise once said, ‘you snooze, you lose.’