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Right before Union Budget 2017-18, the issue of budget or affordable housing, is once again in the spotlight. As the central government reiterates its commitment towards ‘Housing for All’, this aim cannot be fulfilled without budget housing.
While the definition of what constitutes ‘affordable housing’ may differ, broadly, it has to fall within the purchasing power of median income of home buyers, if not the majority of the city dwellers.
This means that more than half the population in any given city, should be in a position to afford it. The moot question is: Will the upcoming budget offer something in this regard?
Government cannot ignore affordable housing
The stakeholders in Indian real estate, believe so. Nikhil Hawelia, managing director of the Hawelia Group, feels that it is no more about whether the government has the intent, but whether the government can justify itself, if it does not announce something major for the budget housing segment.
“After the demonetisation, the next logical step for the Modi government, would be to please the middle-class home buyers, a majority of whom cannot afford to buy expensive properties. The policy makers must have realised that the market now demands affordable housing and hence, the budget should offer something substantial for this segment,” says Hawelia.
2017: The year of the budget housing segment?
Vivek Mohanani, joint managing director of Ekta World, believes that the year 2017 will witness the launch of more affordable housing projects. The new schemes announced by the government for the affordable housing segment, will boost the segment, he says. “The reduction in the lending rates, will fuel demand in the real estate sector. Prospective buyers generally plan their purchases around the budget period, to get clarity on the financial year ahead. This time, with the lending rates being amended, the demand for housing will increase in the coming year, giving a momentum to the realty sector,” predicts Mohanani.
How rental housing can help the ‘Housing for All’ mission
Devang Trivedi, managing director of the Progressive Group, maintains that while the rate cuts will encourage home buyers, the time has come for the policy makers to take the mission of providing housing to the next level. For that, they must institutionalise rental housing, he insists. This segment has the potential to bring many reluctant and half-hearted players into the business of providing housing to the needed segment.
“The budget should review the tax deduction limit for housing loans, as in most of the metro cities, the prices are so high that the current limit of Rs 2 lakhs does not make sense.
While home buyers will be encouraged with higher tax savings on housing loans, the developers too need to have some encouragement. Ultimately, it is all about the viability of the business model,” Trivedi points out.
Tax structures need to be simplified
The government should also look at easing the tax reporting structures in the upcoming budget, if it wishes to encourage budget housing.
As affordability varies with each city, another options that can be considered in the budget, is financial restructuring on a city-to-city basis, to make affordable housing feasible for home buyers, as well as developers.
Why budget housing is so important
- If the central government has to fulfill its commitment for ‘Housing for All’, it cannot be fulfilled without the budget housing segment.
- Budget housing should broadly fall within the purchasing power of median income of home buyers.
- Clarity on beneficiaries under Pradhan Mantri Awas Yojana is needed.
- To encourage budget housing, the budget should provide higher tax saving on housing loans and house insurance premiums.
- The government should raise the tax deduction limit on home loans, especially for buyers in metropolitan cities.
(The writer is CEO, Track2Realty)