Revitalizing Affordable Housing in India: What to Expect from the Modi Government
The Indian real estate sector is eagerly waiting for the Modi government's response to its needs. Will the government grant industry status to the entire housing sector and take effective steps to rejuvenate the affordable housing segment?
Affordable HousingReal EstateModi GovernmentBudgetInfrastructure DevelopmentReal Estate PuneJun 26, 2024
The talk in the sector is, 'Will the government finally grant industry status to the entire housing sector? And will it take effective steps to rejuvenate the affordable housing segment?' According to research by CREDAI-MCHI, the market has shown remarkable resilience in 2024. Sales in the top seven cities hit a record 4.93 lakh units in FY23-24. But the current growth is skewed towards mid-range and premium housing.
Affordable housing has seen a downturn since 2021, dropping from over 26% of the market in 2022 and 38% in 2019, to approximately 20% in Q1 2024. The share of affordable housing in the overall supply in the top seven cities also plummeted to 18% in Q1 2024, from nearly 40% in 2019.
Many incentives for buyers and developers of affordable housing have lapsed in the past two years, exacerbating the issue. Measures such as tax breaks are needed to revitalize this segment. It is suggested that the government reintroduces the 100% tax holiday for affordable housing developers.
The Credit-Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana is essential. This scheme, which expired in 2022, provided subsidies to first-time buyers of affordable homes. The CLSS was available for loans to Economically Weaker Sections and Lower Income Groups for new constructions and home improvements. Reintroducing this subsidy will stimulate demand.
There is also a need to redefine the criteria for affordable housing. According to the Ministry of Housing and Urban Poverty Alleviation, affordable housing is defined by property size, price, and buyers' income. Currently, it is described as a house with up to 90 square meters of carpet area in non-metropolitan cities and 60sqm in major cities, priced up to Rs 4.5 million. However, these price caps are not viable in many cities. For instance, in Mumbai, a budget of Rs 4.5 million is unrealistic.
The threshold should be increased to at least Rs 8.5 million for Mumbai and Rs 6-Rs 6.5 million for other cities. This adjustment would allow more homes to qualify as affordable, enabling buyers to benefit from lower GST rates and subsidies. By addressing these issues, the government can ensure inclusive and holistic development, help Mumbai maintain its economic leadership, and meet the housing needs of an urban population projected to reach 590 million by 2030.
CREDAI-MCHI is a leading real estate association in India, dedicated to promoting the development of the housing sector. The organization has been instrumental in shaping the country's housing policy and promoting affordable housing initiatives.
Frequently Asked Questions
What is the current state of the affordable housing segment in India?
The affordable housing segment has seen a downturn since 2021, with its share in the overall supply dropping to 18% in Q1 2024 from nearly 40% in 2019.
What measures are needed to revitalize the affordable housing segment?
Measures such as tax breaks, reintroducing the Credit-Linked Subsidy Scheme, and redefining the criteria for affordable housing are needed to revitalize the segment.
What is the Credit-Linked Subsidy Scheme (CLSS)?
The CLSS is a scheme under the Pradhan Mantri Awas Yojana that provides subsidies to first-time buyers of affordable homes.
Why is there a need to redefine the criteria for affordable housing?
The current price caps of Rs 4.5 million are not viable in many cities, and increasing the threshold would allow more homes to qualify as affordable.
What is the projected urban population of India by 2030?
The urban population of India is projected to reach 590 million by 2030.
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