Real estate had previously lost its credibility with the general public somewhat as projects were not being delivered on time and most of the buyers had lost their interest in this sector. With affordable housing coming into the picture, and with certain measures taken by the Government of India to provide support to this sector to take it out of troubled waters, buyer confidence has once again been regained. Moreover, a majority of realty buyers will be entering the affordable housing segment as demand for such homes is increasingly on the rise.
There are a number of factors due to which affordable housing will be a major player in real estate. The Central Government is itself pushing this segment and the Union Budget also has many provisions on reviving the real estate sector especially for affordable housing. Around 1.5 crore affordable homes have been built over the last five years under the PMAY (Pradhan Mantri Awas Yojana) and 1.95 crore homes have been built as a part of Phase II. To further boost demand, the Finance Minister has also announced additional deduction of up to INR 1.5 lakh for the interest paid on the housing loans that will be borrowed till March 31st, 2020 for purchase of affordable homes.
Other factors propelling affordable housing towards growth
The FM has also recently announced an Alternative Investment Fund or AIF for the stalled affordable and middle income housing projects. There are several NPA projects as well and the ones that are facing bankruptcy proceedings under the NCLT might also be included if they are not referred for liquidation. Hence, this move will result in the influx of more stalled projects into the eligibility criteria and will definitely provide added relief to homebuyers who are not sure whether they will get their money back. All of this is expected to help the affordable housing sector and a large chunk of homebuyers will have shifted their focus to affordable housing over the next 1-2 years and so on. There can be delays in the delivery of projects and there are also issues related to economic slowdown that have affected the real estate sector in a big way but affordable housing is riding strong at the moment.
Apart from government initiatives, another factor boosting the demand for such homes is the growing population of the country. India is the second largest populated country in the world and a major chunk of that population belongs to the lower and middle class income groups who strive to buy a home in major cities. Having a look at their budget, the demand for affordable homes will increase in the coming years. About 10 million PMAY units are set to be delivered by 2020 and that will make affordable housing a dominant segment in the years to come. The premium homes in Tier I cities are quite unaffordable for many and with the increase in urban population which is expected to grow by 590 million by 2020 at a compound annual growth rate of 2.4% between 2010 and 2030, it will encourage more and more developers to come up with affordable housing projects.
On the other hand, the Public Private Partnership model that has been introduced by the government for affordable homes has definitely provided some added significance to the segment and there are collaborations between the public and private sectors not just for resource generation but also to increase the trust factor of the buyers that will involve government bodies. All of this will give a boost to the affordable housing segment. The future of affordable housing thus indeed looks promising and it is expected that Indian real estate will shrug off its slowdown in the years to come.
