Granting of infrastructure status to the affordable housing segment has been one of the highlights of the budget which would help bring in more supply of affordable homes at lower prices. The move is seen as a strategic one as the fortunes of about 250 (ancillary) industries are tied to the revival of the real estate sector. Robust supply of affordable homes would take the mission to provide “Housing for All” by 2022 closer to reality. Bringing affordable housing under the infrastructure umbrella would help developers access loans at competitive rates as infrastructure loans are of longer duration and come at relatively lower rate of interest. “Industry status for affordable housing will increase the lines of funding for the affordable housing sector. Insurance companies, EPFO funds, among others, could now have an exposure to real estate through affordable housing,” says Kotak Institutional Equities.
Besides opening the low-cost windows for developers, the budget has also tweaked the definition of affordable homes that would translate into homes which would be 30% larger, thus triggering more demand “which should amplify the interest of developers further, to build more affordable projects, thereby, increasing supply”, says Sunil Mishra, Chief Strategy Officer at PropTiger.com. For promoters of affordable housing projects, the budget has also relaxed the timeline for completion of projects to five years from three years earlier.
To boost the affordable housing segment in rural areas, the budget has proposed to build one crore houses in rural areas by 2019 which are basically aimed at proving homes to the homeless and those living in kucha houses.
“The 44% increase in allocation to rural housing will also help push job creation and create demand in the rural economy,” says Crisil. In the “Housing for All” mission, the government had earlier announced to make two crore homes in urban areas for the economically weaker and low income group people. To catch up with these ambitious goals, the government needs to ensure that India actually build over three million homes per year. To many, it seems challenging as large parcel of land would be required to build the stated homes. What may boost the output is the fact that the government’s big push towards affordable homes has enthused many big developers to enter the affordable housing space in a big way. Big players do have the wherewithal to scale up supply capacities. Earlier, they were not much interested in this segment for its lower margins.