Affordable housing and government measures to promote it

Affordable housing and government measures to promote it

 

Affordable housing is taking stage globally as well as nationally in India. Housing is considered a basic need by the government. Therefore the government at every level is trying their best to provide affordable housing for every citizen. Quality, quantity, availability, and affordability have become key components in national economic competitiveness. 

Indian living conditions are too moderate and to increase these conditions, the government is working on a large scale for our citizens. Affordable housing has been a significant block for its citizens. The role and functions of housing choices impact access to infrastructure, employment, household wealth, poverty levels, women’s participation in the workforce, and other well-being indicators. 

Affordable housing can be defined in many ways, but the most commonly accepted definition refers to affordable housing units for those with below-average household income. Affordable housing in India is considered for lower-income people, middle-class sections, and economically weaker sections with considerably low-income levels in urban areas. 

Affordable housing is a key factor in developing countries like India, where most people cannot afford houses because of the high market price. 

Land is the primary constraint in urban areas. So affordable housing needs to be differently tailored to rural and urban areas. There is a widening gap between the demand for houses and their availability. Both urban and rural areas suffer from a lack of proper housing facilities. As per the report of the Technical Group on Estimation of Urban Housing Shortage, there is a considerable gap, 96% of the total housing shortage in India, between economically weaker sections and low-income groups.

Need for the promotion of affordable housing in India

Urban areas need to be expanded for housing facilities to increase the given needs for houses and increase the trend of urbanization. We can consider that around 40% of the population of India is expected to live in urban areas by 2030. 

As per planning commission methodology, the estimation of affordable housing needs and house shortages are calculated based on 

• Several households reside in unacceptable dwelling units. 
• Excess of the home over housing stocks
• Unacceptable living conditions, physically or socially, due to overcrowding and congestion factors 
• The homeless households

Obsolescence of houses, congestion, and homeless factors estimate new housing scheme demand. 

Action is taken for affordable housing

Over the last 15 years, the government has recognized the importance of providing housing to weaker sections. The National Urban Housing and Habitat Policy (NUHHP), 2007, has set the objective of Affordable Housing for all as a key focus. 

2022, the current year is set by the government to make specific initiatives for promoting the affordable housing scheme under the two components - Pradhan Mantri Awas Yojna (PMAY) Urban and Pradhan Mantri Awas Yojna (PMAY) Rural. The government launched it to achieve housing for all by 2022. 

Government measures to support affordable housing 

In the Union Budget of 2017-2018, the following government measures were said to be taken: 

1. Affordable housing is considered under the infrastructural status. Infrastructural status can help affordable housing developers to avail funds from different channels, like external commercial borrowing, foreign venture capital investors, and foreign portfolio investors. 
2. Earlier the projection completion time was three years, which has been promoted to five years to complete the affordable housing projects. 
3. The government has provided one year time to developers to pay tax on notional rental income on completed unsold units. 
4. The government has reduced the affordable housing term for long-term capital from three years to five years. 
5. Earlier the qualifying criteria for affordable housing was a saleable area which has been revised today to a carpet area. 
6. National Housing Bank has enhanced refinancing facilities for individual loans for the affordable housing segment.

 

The government is encouraging developers to move toward the affordable housing sector

The government has provided several incentives including subsidies, tax benefits, and institutional funding. Also, the government has created the Affordable Housing Fund (AHF) for the National Housing Bank. The government would lend shortfall and fully serviced bonds to dedicated funds from the priority sector, which the Indian government authorizes. 

In the budget of 2019, the government has made several supportive measures for the second-self-occupied house, which will include exemption on levy of income tax on notional rent, and it increases the TDS threshold on rent to Rs. 2,40,000. 

GST rates reduced for affordable housing 

The tax rate has been reduced from 8% to 1% by the GST council. As per the council, the ceiling value of affordable housing has been increased to Rs. 45 lakhs. It implies that houses below Rs.45 lakhs will be exchanged with GST rates of 1%. 

Carpet area limit: 

In terms of carpet area, affordable houses are defined as 90sq m in non-metropolitan cities and 60sq m in metropolitan cities, with a ceiling value of Rs.45lakhs.

Reserve Bank of India’s (RBI) efforts for affordable housing

As per the RBI incentive measures, the reasonable residential property cost should be less than Rs.65 lakhs in metro cities and Rs. 50 lakhs in non-metros. RBI gives loans to affordable housing under priority sector lending. RBI issues a minimum of seven years of maturity of long-term bonds to finance loans for affordable housing.

The government’s scheme, The Housing for All, by 2022 had enabled the development of suburban areas, with a significant focus on enhancing infrastructure. The reality for Indian families will change in the coming decades; people can dream about owning a home.

Rsheladia is a real estate company in Ahmedabad serving the construction industry for four decades. They are among the leading residential construction companies in Ahmedabad.