Certain media reports are pouring in the possibility that the government would accord low-cost housing, an infrastructure status tag. If that happens, it would turn out to be a landmark reform for the housing sector in India.
The Plan
The government is looking to enlarge the scope of infrastructure in the upcoming general budget to include low cost or affordable housing into it. This would automatically lure more investors and cheap capital into this form of housing.
Another step towards Housing for All
The Prime Minister only recently has announced an increase in interest discount for lower income groups to 4% for home loans up to INR 9 lacs and 3% for loans up to INR 12 lacs. If this new proposal goes through this would be the second biggest decision for this sector this year. When implemented, these would accelerate the work to achieve the Prime Minister’s vision of Housing for All by 2020.
Impact on Realty Sector
Off late many, A grade developers have turned their attention towards affordable housing as government policies started favoring it. Giving an infrastructure tag to such projects would attract more investors committed to the long-term India story. Indian real estate, especially commercial real estate has seen a lot of influx of foreign capital. The infra status would mean that pension funds and other institutional investors from abroad would see affordable housing as a viable option to park funds. Cheaper capital and ease of fundraising would help developers to further reign in their costs.
“India is facing a severe housing shortage, prominently in the EWS and mid-income group category. It is estimated to be around 22 million households and the actual figure could be much higher. Hence, this step would be a significant force to address the housing shortage in India.”
The challenge
The major challenge for the government would be to clearly lay down guidelines for according this status. It would help to have a clear definition of low-cost housing. Another crucial area under watch would be that the funds which are raised be used only for a particular housing project. Also, tax breaks for such projects would have a meaningful impact and keep prices more reasonable for end users.
