Reviving Affordable Housing in India: Can Modi Govt Deliver?
The real estate sector is waiting for the Modi government to take effective steps to boost the affordable housing segment, which has seen a significant downturn since 2021.
Affordable HousingModi GovernmentReal EstateCredai MchiPradhan Mantri Awas YojanaReal Estate MumbaiJun 26, 2024
According to research by CREDAI-MCHI, the market has shown remarkable resilience in 2024, with sales in the top seven cities hitting a record 4.93 lakh units in FY23-24. However, 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. 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. Removing the cap from the definition of affordable housing and declaring all homes under 60sqm as affordable homes would also help.
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.
Frequently Asked Questions
What is the current state of the affordable housing segment in India?
The affordable housing segment has seen a significant downturn since 2021, with its share in the overall supply plummeting 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 100% tax holiday for affordable housing developers, and reviving the Credit-Linked Subsidy Scheme are needed to revitalize the segment.
What is the definition of affordable housing in India?
According to the Ministry of Housing and Urban Poverty Alleviation, affordable housing is defined by property size, price, and buyers' income, with a maximum carpet area of 90 square meters in non-metropolitan cities and 60sqm in major cities, priced up to Rs 4.5 million.
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 the threshold should be increased to 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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