Your dream home just became bigger

by Ravindra Sudhalkar

Your dream of owning a bigger home just became a reality. The decision of the government to increase the carpet area of houses eligible for interest rate subsidy under the Pradhan Mantri Awas Yojna (PMAY) will lead to more inclusivity of people under the affordable housing scheme in smaller towns and cities of the country.

According to the revised norms, the Housing and Urban Affairs Ministry has enhanced the carpet area of houses eligible for subsidy under Credit Linked Subsidy Scheme (CLSS) for Middle Income Groups (MIG) to 160 square meters for MIG-I and 200 square meters for MIG-II. Earlier, the cap on carpet area for MIG-I and MIG-II categories was 120 square meters and 150 square meters, respectively.

Households with annual income of Rs 6 lakh to Rs 12 lakh have been put under MIG-I category, while those earning over Rs 12 lakh up to Rs 18 lakh fall under MIG-II segment. The government will provide a 4% interest subsidy for Rs 9 lakh in the case of MIG-I home-buyers and 3% interest subsidy for Rs 12 lakh in the case of MIG-II home-buyers.

The decision is a big boost for home-owners who would enjoy bigger homes with the benefit of interest subsidy under PMAY scheme of the government. This will now ensure higher inclusivity as more people would become eligible under the MIG category for the subsidies. Customers, especially from smaller (Tier-II and III) cities and towns, would now be able to own a bigger home, thus boosting their standard of living.

Putting an economic lens to this change in PMAY scheme will reveal that the construction activities in the affordable housing segment will be getting a boost where the focus of the developer could shift to catering to demands of larger homes especially in non-metro cities. Projects with larger flat sizes will now get added to the existing affordable housing stock thus expanding the choices for the customers. Growth of ancillary industries like cement, steel, paints etc. will also see a higher demand resulting in net positive impact on the country’s overall economic health.

The timing of the decision couldn’t be better as it coincides with the recent decision of the Reserve Bank of India (RBI) to revise the housing loan limits for Priority Sector lending (PSL). Home Loan limits are now enhanced from the existing Rs 28 lakh to Rs 35 lakh in metros, and from Rs 20 lakh to Rs 25 lakh in other cities & towns.

While the government’s initiative is extremely commendable, it must be driven at an accelerated pace hereon. This could be made possible if as the next step, the government considers doing away with any form of caveat on the area of homes for affordable housing. This apart, there are a lot of middle class home-owners who want to upgrade their houses because of increase in family size and this class of home-buyers should also be included under the CLSS; however, they may not be first-time home-buyers. The focus of the government should also be on single home-ownership rather than on sizes of the home. This will bring the focus on living standard in addition to home-ownership. Details for this can be worked out jointly with the policymakers and industry players such as builders, bankers and financers like us.

As industry leaders, we must realise the need for greater collaboration to identify the bottlenecks and help in expediting of reforms for meeting the targets under the Honb’le Prime minister’s ‘Housing for All Scheme.’