Budget 2017 – Aims to Boost Affordable Housing Plan
The real estate sector had a long wish list for the Finance minister and a few things the market was expecting have seen the light of the day. Needless to say, it was the affordable housing which received the “infrastructure status” that stole the show. In his Union Budget for 2017-18, Finance minister, Arun Jaitley has proposed granting of ‘infrastructure status’ to the affordable housing segment. This announcement can serve as a significant step in achieving the government’s “Housing for all by 2022” mission. This will also be a game changer for all the developers who already have a great presence in the affordable section.
Government granting “Infrastructure” to affordable housing sector will surely provide a good boost in the volume of construction activity across India. It will also help the realty industry that was struggling with reduced number of projects launched in the last couple of years.
The real estate sector will happily welcome this move as this will act as a catalyst to meeting government’s objective of housing for all. Credit offtake towards affordable housing segment will lead to the creation of supply especially for both, the stakeholders – the first time home buyers and the developers – who will now have access to cheaper funding. The focus of government on affordable housing has also made this term more acceptable to the developers. Leading real estate players are now willingly entering this affordable segment with confidence and are talking about it openly.
We know that the Modi government has taken several steps to boost affordable housing and housing for all since coming to power. Pradhan Mantri Awas Yojana, The “Housing for all by 2022” are some of such initiatives. To promote affordable housing, the government also proposed to amend the section 80-IBA, relaxing the condition of the period of completion of the project for claiming a deduction from the current 3 years to 5 years.
The finance minister also said that instead of build up area of 30 and 60 square meter, the carpet area of 30 and 60 square meter will be counted. This shift in the eligibility criteria will increase the unit size by 20-30% and will also offer home seekers the benefit of owning larger units. Easy and dedicated access to institutional financing, More and more investors will be attracted after higher limits on the external commercial borrowings, which will further assure sustained growth of affordable housing in India, making it the core driving segment for real estate.
Lower rates on long-term financing will reduce the costs of construction for developers which will in turn benefit the customer. The new status will increase the resource allocation for the sector, catalysing housing supply and reducing the supply gap. Also, the tenure of loans under the CLLS of Pradhan Mantri Awas Yojana was increased to 20 years from 15 years. The government also offered tax soaps for developers sitting on the completed unsold inventories. There is now considerable goodwill attached to making such a move and affordable housing obviously makes eminent business sense.
It is believed that the announcement of budget 2017 will surely have a positive impact on first time home buyers. Also, the tax rate has been further reduced from 10% to 5% on income between Rs. 2.5 lakhs and Rs. 5 lakhs. This move will further help the first time home seekers to go ahead and buy a property of their own. So, if you are among those home seekers looking for buying a property of your own to the soonest. Then, buying a property in Thane is advisable, as the residential projects of Thane offer spacious living spaces at a price which is quite low when compared to metropolitan cities like Mumbai and Delhi.