More room for affordable growth

Geetu Vaid

Affordable housing has emerged as the most previleged segment in the realty sector over the past three years, courtesy a continuous government policy push. This month, too, good news has been raining on this segment —  whether it is the revision of housing loan limit by the central bank for priority sector lending (PSL) last week or  an increase in the prescribed carpet area for MIG under the Credit Link Subsidy Scheme (CLSS) of the Pradhan Mantri Awas Yojana (PMAY), earlier this week. 

While both the moves  are meant to provide a forward thrust to the Housing for All by 2022 mission, the widening of the eligibility criteria will surely breathe in some life in the comatose realty market.   

Decoding carpet area revision

Earlier this week the government eased carpet area norms for eligibility to avail subsidy under the PMAY-U. Announcing an almost 33 per cent relaxation the Ministry of Housing and Urban Affairs stated that eligibility limit for carpet area had been enhanced from 120 sq m to 160 sq m for MIG-I category,  and from 150 sq m to 200 sq m for MIG-II category. The CLSS allows beneficiaries to claim interest subsidy up to Rs 2.35 lakh on purchasing a house in these categories. 

So, in effect this move will bring more homebuyers and projects in its fold, and will allow more developers to offload their stock. It is being seen as a catalyst for the slowdown-plagued market in tierII and tier III cities. According to industry mavens, the positive impact of this move will be felt in peripheral areas of metros, like peripheral locations in NCR, MMR and Bengaluru, as also in tier 2 and 3 cities. The impact of this will be in form of increased economic activity and  improved demand. 

This is the second increase in carpet area in less than a year. Different stakeholders and industry body NAREDCO had been demanding the removal of carpet area cap of 120 sq m and 150 sq m for quite some time now. Hailing the move Niranjan Hiranandani President (National), NAREDCO, said, “This will create a positive sentiment, enhance off-take of homes in MIG, the largest among residential real estate segments, with obvious positives in the form of growth for the housing sector."

Terming it as a step in the right direction Anshuman Magazine, Chairman, India and South East Asia, CBRE maintained, “The latest relaxation will allow a large proportion of housing, particularly in tier 1 cities, to be covered under the scheme. This will not only enable more homebuyers to avail the subsidies and other incentives in the scheme, but will also help bolster construction activity in the affordable housing sector."

Bringing up the fact that Tier 2/3/4 cities and towns have larger sized apartments Rohit Poddar of Poddar Housing group said, “The erstwhile  carpet size criteria of MIG housing didn’t encompass the largest part of homebuyers. But  with the increase in the carpet area now a much larger percentage of homebuyers in these towns  will be eligible for the PMAY scheme and also CLSS”. 

Adding another perspective for further growth, Hiranandani said, “From the perspective of real estate, it would be ideal if the government's investment in interest subsidy scheme which is around Rs 50,000 crore currently, can be increased to Rs 75,000 crore. This can also give a boost to rental housing if buyers of second homes are also brought under the scheme — these can create an enhanced rental housing stock”.

Deepak Kapoor, Director, Gulshan Homz & President, CREDAI, Western-U.P., added, “ The MIG category in a developing nation like India has a huge demand for housing units. The increase in carpet area will improve the construction activity and will assist in moving the housing sector forward”.

Dhruv Agarwala, Group CEO, Proptiger.com, Housing.com, Makaan.com said the move would mean  developers witnessing higher demand for ready- to-move-in affordable housing units falling under these brackets. “Also, this will mean the facilitation of higher investments in affordable housing segment which has been accepted very well in the market, both by investors and end users”, he added.

Thus, these two measures will generate positive momentum by working in favour of industry players and the homebuyers.

Revision of loan limit

Last week the RBI had announced the revision of housing loan limits for eligibility for priority sector lending (PSL)  from the existing Rs 28 lakh to Rs 35 lakh for metros, and for other cities from the current Rs 20 lakh to Rs 25 lakh. The overall cost of the dwelling unit in the metropolitan centre (with population of 10 lakh and above) and at other centres should not exceed Rs 45 lakh and Rs 30 lakh, respectively. The move, coupled with the government decision to use surplus land of sick PSUs for construction of affordable units, will add momemtum to affordable housing across the country.  A direct fall out of this move would be a substantial increase in the availability of housing stock in the primary as well as resale markets. Homebuyers and the realty market are set to benefit from this as a large number of homebuyers will now be able to avail benefits under PMAY-U triggering sales. According to a survey by Magicbricks.com, the MIG category stock would almost double now.  The cities likely to benefit the most include Greater Noida in the MIG category. According to Magicbricks data, the number of available properties for sale in this market has gone up from 31 to 55 per cent. It is followed by Ghaziabad, Kolkata and Noida. The southern cities of Chennai, Hyderabad, and Bangalore will have around 20 per cent of the city's stock eligible under the PMAY-U for the mid-income segment buyers. In the LIG category, the revision has led to a significant addition of eligible stock in Chennai, Thane, Pune, and Navi Mumbai. While the average price in these cities is high, increase in the price limit to Rs 45 lakh brings the peripheral areas of these cities with relatively cheaper stock into the scheme fold and makes the purchase relatively cheaper, reveals the property portal.

Applicable from

• Earlier, the tenure of the CLSS for the MIG category had been extended by 15 months to March 31, 2019. The government had initially intended to implement the scheme for one year.
• The revision will be applicable from the date of implementation of the CLSS – 1 January 2017. 

How much subsidy

• CLSS for MIG-I allows 4 per cent interest subsidy on loan up to Rs 9 lakh for people with an annual income between Rs 6-12 lakh.
• Interest subsidy of 3 per cent is given on loan up to Rs 12 lakh to people with income between Rs 12-18 lakh per annum. 
• A beneficiary can avail subsidy up to Rs 2.35 lakh, and it is applicable for the first-time home buyers till March 31, 2019.