The year 2022 was the Indian government's deadline to ensure housing for all. It didn't meet it. The miss comes even as the Centre's low-cost housing push has unravelled owing to factors like the COVID-19 pandemic and sustained inflation. However, the housing sector believes that all it takes is four policy measures to breathe life into the government’s affordable housing push.
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First, real estate developers want their compliance burden to reduce if policymakers are serious about affordable housing in India. This, they say, will help projects get cheaper and meet their completion deadlines faster.
Demand#1: Faceless Approvals
"Why do we need so much red tape in building plan approvals? Can we not bring one faceless system at least for affordable housing?" reasons M Murali, chairman and managing director of Shriram Properties, "That saves close to about 5 percent of the cost… just the financing cost on delays."
The suggestion comes even as affordable housing sales paled in comparison to other segments in 2022. It didn’t matter that loans got costlier, residential sales still hit a ten-year high. Nearly half of these deals, according to property consultant JLL were homes priced between Rs 50 lakh and Rs 75 lakh, which are commonly referred to as the mid-range segment.
In contrast, homes priced below Rs 50 lakh — these are widely regarded as affordable — accounted for only 28 percent of all home sales in 2021, before falling to just 22 percent last year.
According to consultancy firm Knight Frank, the pain worsened as the year wore on, as ‘affordable’ homes accounted for only 35 percent of all homes sold between July and December 2022. For context, July-December saw these homes account for 42 percent of the housing sales share in that period.
Demand#2: Change bidding system for PSU land banks
Developers say one way to incentivize affordable housing for developers — and by extension buyers, if the builder chooses to pass on the benefit — is to help make the land it is built on, cheaper. The second suggestion the industry has is to urgently review the auction process for prime land owned by PSUs, in order to make these land banks more feasible to build affordable homes.
"The moment you bring this land through bidding, and when people are bidding at extremely high rates, and at those numbers, the land can be put to use only for the upper end of the segment," says Gulam Zia, executive director, Knight Frank India, "To ensure that it is used to build affordable housing, a bit of tinkering is required in the model of bidding."
This demand is particularly important given the distinct and noticeable lack of amenities and social infrastructure in and around affordable housing projects. Developers and analysts believe that should government-assisted land allocation happen, it would solve the infrastructure problem, which further enhances the viability of buying a low-cost home.
"Today, affordable housing is about 50-60 kilometres away from cities, with very low social infrastructure with no schools, no healthcare, no decent convenience stores,” says Siva Krishnan, MD and Head (Residential Services), JLL India, "That's how land prices are low, and that's where developers are trying to attempt to build affordable housing."
Demand#3: Change the definition of ‘affordable’
But there’s another aspect of affordable housing that needs to change — its very definition. At present, the Centre recognizes housing units priced at Rs 45 lakh or less as ‘affordable’. However, last year, residential prices rose between 4 and 7 percent, causing experts to reason that policymakers need to get real with what they call ‘affordable’.
"Finding an apartment below Rs 50 lakh is almost out of the question in a city like Mumbai,” points out Zia, “All affordable housing projects under the PMAY (Pradhan Mantri Awas Yojna or the Housing for All scheme) are mostly driven under that segment, and that is a concern."
He added: "Mumbai would be far better off if anything about Rs 75 lakh or slightly beyond Rs 75 lakh by way of a transaction is deemed ‘affordable housing’."
Demand#4: Widen income-tax exemptions on loans against affordable homes
The fourth item on developers’ wish list is to expand the eligibility of income-tax rebates from just first-time buyers of affordable homes to buyers of homes that meet the new definition of what's affordable.
Some players also want a tax rebate on the entire interest paid by homebuyers who re-pay loans for an affordable home.
Also Read: Budget 2023 | Experts demand higher allocation to Pradhan Mantri Awas Yojana amid controversies in Bengal and Odisha
"For interest paid against any borrowing for the first house, an income tax rebate must be given against the entire interest amount," says Mallana Sasalu, COO at Provident Housing.
He added, "This indirectly gives buyers between Rs 7,000 and Rs 7,500 per month, which means they can re-invest that amount to buy a house that’s more liveable and larger, even as the amount becomes part of their EMI."
India’s real estate sector believes that the Centre’s eight-year-long push for housing for all has its heart in the right place. When it comes to walking the talk, though, a lot more may be needed.
Property developers say that unless the government pushes for reforms in personal taxation, land allocation housing policy and infrastructure planning, there’s only so much they can do to put a roof over everyone’s head.