Is affordable housing a distant dream? Affordable housing seems to be the real estate buzzword since Modi government came to power. Almost every day there is some news on policies related to affordable housing or associated projects. And rightly so, as affordable housing is the need of the hour as millions of people belonging to the Economically Weaker Section of the Society in India with income below the median household income struggle for decent housing options in urban and rural areas. However, though this government has promised “housing for all by 2022”, affordable housing still seems to be a distant dream for many, especially as Government had very little to offer to the real estate sector in India till now. However, though the Budget this year did not have major positive announcements for real estate, the government, time and again, has taken steps to build confidence of all those associated with the real estate sector in India. Given below is an insight into major announcements with regard to affordable housing: Rs.4000 crore sanctioned for low-cost housing schemes Relaxed FDI rules to support affordable housing schemes Service tax increased from 12.36% to 14%, which inadvertently will have a negative impact on affordable housing projects. 22 Crores for affordable housing As soon as the Modi government came to power, it announced its plan to construct 4 crore houses in urban India and 2 crore houses in rural India and allocated Rs.22, 4007 crores for housing and urban development. In this Budget, some very good projects for Economically Weaker Groups (EWGs) and Low Income Groups (LIGs) were announced, which is a very promising step as it is these sections that are most affected by shortage of affordable housing. However, it is yet to be seen what policies will be announced to address the housing needs of mid-income groups who are also affected by the shortage of houses. FDI policy has been amended The FDI policy has been amended to attract more foreign capital in the affordable housing segment and this could lead to a lot of positive development in the sector. Private-public partnership is the need of the hour and relaxing FDI norms will mean that more foreign companies can tie up with the government to create joint venture affordable housing projects. The influx of FDI will also see new innovations and technologies to mobilize affordable housing, with ideas such as pre-cast construction to drive down the cost of construction and much more. However, there are many real estate arenas where the government has failed to meet the expectations of the affordable housing segment of the real estate sector. Some of those aspects are:
Increase in service tax a major blow The increase in service tax is a big setback to the industry. The government has increased service tax from 12.36% to 14%. The impact of this on the affordable housing segment can be significant. When the affordable housing segment has in fact been asking for a stimulus package from the government, an increase in service tax can have an opposite effect and can increase the cost of houses to a significant extent. It can also lead to an increase in the price of raw materials. Lack of clarity and failure to reintroduce Section 80-IB for affordable housing There is no clarity when it comes to smart cities and their implementation or the failure to remove DDT and MAT in special economic zones. Also the government has not yet reintroduced Section 80-IB for affordable housing. Added to this, the increase in the limit of interest deduction on home loans from Rs.2 lakh to Rs.5 lakh has caused some disappointment, apart from no tax breaks for new affordable housing projects. No significant action approving single window clearances Single window clearances are the need of the hour in terms of completing projects, especially as increasing land prices and outdated, unnecessary approvals and regulations as well as the lack of a specific government policy will adversely impact the affordable housing dream. Failure to address housing finance needs of low income groups The failure to define policies will impact the lower income groups, who will find it increasingly difficult to borrow from traditional financial services. The Government has not sparked any interest in low-income housing finance and loans and this will mean that the affordable housing sector will have to rely entirely on state governments to take action. A few states like Andhra Pradesh and Gujarat have managed to do this to a certain extent but it remains to be seen if other state governments will engage with private players in building intelligent public-private partnership models. With the Government offering no concrete steps to address the problem of affordable housing in the country, there exists a gap between what developers want to build (luxury and high end projects that can get them their large profit margins) and what buyers want (affordable houses targeted at the Rs.5 lakh to Rs.20 lakh range). No wonder that, at present there is a huge affordable housing shortage in the country, specifically for the EWS and LIG groups, who constitute majority of the affordable housing sector. Source: CommonFloor.com For Latest Updates on Real Estate Updates, Property News and Cities Infrastructure Developments Visit: http://www.commonfloor.com/guide
Copyright Š 2007-14 CommonFloor.com. All rights reserved.