Only a paltry number of developers have built housing that meets the Government’s criteria for incentivized affordable housing in 2019. ANAROCK data reveals that of the total housing supply of 1,39,490 units in the top 7 cities H1 2019, merely 39,840 units meet these criteria. The Government's recent Budget ‘bonanza’ of an additional INR 1.5 lakh tax deduction on interest repayment of home loans availed till March 2020 will benefit very few people in urban India.
To avail credit subsidy benefits along with the new Budget sops for affordable housing, a home must be priced <INR 45 lakhs and not exceed 60 sq. mt. carpet area or approx. 850 sq. ft. built-up area, including overall loading. Of the 1,39,490 units launched in H1 2019 in the top 7 cities, merely 29% of units qualify under the government-stipulated affordable category.
Of the housing shortage of 19 million units in urban India, nearly 96% pertains to the EWS and LIG categories - the target of the government's affordable housing push. As per ANAROCK research, nearly 2.40 lakh units that are unsold across the top 7 cities as on Q2 2019 are in the affordable category but many of these do not comply with the government's narrow 'affordable' definition. This unsold stock has increased by nearly 3% against the corresponding period in 2018.
Unlike earlier, developers are quite keen on affordable housing, despite the lower profit margins when compared to the luxury or ultra-luxury segments. Supply follows demand - to illustrate, prominent developer Puravankara’s affordable brand Provident Housing jacked up its new supply in Q4 2018 jump to 10.59 mn sq. ft. as against 6.63 mn sq. ft. a year earlier, while Puravankara's premium housing supply saw a 5% decline over the same period.
Nevertheless, there are 'natural' barriers to deploying more supply in the government-stipulated affordable category:
Unlock government-held land for development:
Across cities, some portions of land falling under the departments of Heavy Industries, Indian Railways, Port Trusts, etc. can be released by the respective government bodies. The infusion of low-cost land will also help curtail property prices.
Revise the price definition of affordable homes in top cities:
The government must seriously consider revising the pricing of homes that fall within the affordable housing price band, city-wise. While the prescribed unit size of 60 sq. m. carpet area is fairly appropriate, the prescribed pricing restrictions are not viable across most cities except in the far-flung peripheries which lack liveability and accessibility.
If this price restriction is widened, many more homes will fall within the affordable price tag and qualify. As a result, many more aspiring propertybuyers can avail the multiple benefits such as lower GST rates at 1% without ITC, government subsidies and the most recent tax deduction of total INR 3.5 lakh on interest repayment of home loans. Such a boost to housing sales cannot come soon enough.
Anuj Puri, Chairman of ANAROCK Group is a highly respected industry authority and thought leader with 30 years' experience in leveraging Indian and global real estate opportunities. His company ANAROCK has a staff complement of over 1800 qualified and experienced professional, with offices in all major markets in the country, dedicated services in Dubai and a global footprint with over 80,000 preferred channel partners.