India's Housing Conundrum: Why Affordable Housing Remains a Distant Dream
With over 1 crore vacant flats in India, the country's affordable housing segment remains stagnant, while high-end residential units see a massive surge.
Real EstateAffordable HousingPremiumisationWealth DisparityProperty TaxGstStamp DutyReal EstateJun 15, 2024
The influx of high net-worth individuals (HNIs) and institutional investors in the residential real estate space has led to the underutilisation of units, with approximately 1.14 crore flats lying vacant in India. These units are being bought as investment opportunities, and investors are not putting them up for rent. Babu believes that this is a national crime, and the government should pass a law to charge double or triple property tax on idle flats to encourage investors to rent them out or sell them.
The current scenario is particularly challenging for the affordable housing segment, which is struggling to cater to the economically weaker section (EWS), low-income group (LIG), and middle-income group (MIG). The EWS, which constitutes nearly 60 per cent of the population, relies heavily on government schemes and rental models, as they cannot afford to buy flats. Even if a flat costs Rs 30 lakh, the EMIs alone would be a significant burden for them.
To incentivise growth in the affordable housing sector, Babu suggests that the government should revisit its policies. For instance, the upper limits on housing area and cost under Section 80-IBA should be revised, and interest rates for affordable housing should be reduced from 9 per cent. Additionally, GST rates and stamp duty charges should be rationalised to make affordable housing more viable for developers.
If the government accepts these recommendations, Babu estimates that the affordable housing sector could see a growth of at least 25-30 per cent. This would be a significant step towards achieving the government's goal of making India a developed country by 2047, where at least 96 per cent of the population should have living comfort. As it stands, 40 per cent of the people are still living in slums, which is a far cry from the government's aspirations.
Frequently Asked Questions
What is the current state of India's affordable housing segment?
The affordable housing segment is stagnant, while high-end residential units are seeing a massive surge.
What is the reason behind the underutilisation of units in India?
The influx of high net-worth individuals and institutional investors in the residential real estate space has led to the underutilisation of units, with approximately 1.14 crore flats lying vacant in India.
What is the impact of the current scenario on the economically weaker section (EWS)?
The EWS, which constitutes nearly 60 per cent of the population, relies heavily on government schemes and rental models, as they cannot afford to buy flats.
How can the government incentivise growth in the affordable housing sector?
The government can revisit its policies, revise the upper limits on housing area and cost under Section 80-IBA, reduce interest rates for affordable housing, and rationalise GST rates and stamp duty charges.
What is the expected impact of the recommended changes on the affordable housing sector?
The affordable housing sector could see a growth of at least 25-30 per cent if the government accepts the recommended changes.
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