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Only 29 per cent of H1 2019 housing supply qualifies for sops in top 7
Only a paltry number of developers have built housing that meets the government’s criteria for incentivised affordable housing in 2019.
Anarock data reveals that of the total housing supply of 1,39,490 units in the top 7 cities during H1 2019, merely 39,840 units meet these criteria.
The government’s recent Budget ‘bonanza’ of an additional Rs 1.5 lakh tax deduction on interest repayment of home loans availed till March 2020 will benefit very few people in urban India.
To avail credit subsidy benefits along with the new Budget sops for affordable housing, a home must be priced under Rs 45 lakh and not exceed 60 sq mt carpet area or approx 850 sq ft built-up area, including overall loading. Of the 1,39,490 units launched in H1 2019 in the top 7 cities, merely 29% of units qualify under the government-stipulated affordable category.
Anuj Puri, Chairman, Anarock Property Consultants, tells us, “Of the housing shortage of 19 mn units in urban India, nearly 96% pertains to the EWS and LIG categories – the target of the government’s affordable housing push. As per research, nearly 2.40 lakh units that are unsold across the top 7 cities as on Q2 2019 are in the affordable category but many of these do not comply with the government’s narrow ‘affordable’ definition. This unsold stock has increased by nearly 3% against the corresponding period in 2018.”
Hurdles to the mission
Unlike earlier, developers are quite keen on affordable housing, despite the lower profit margins when compared to the luxury or ultra-luxury segments. Supply follows demand – to illustrate, prominent developer Puravankara’s affordable brand Provident Housing jacked up its new supply in Q4 2018 to 10.59 mn sq ft as against 6.63 mn sq ft a year earlier, while its premium housing supply saw a 5% decline over the same period.
Nevertheless, there are ‘natural’ barriers to deploying more supply in the government-stipulated affordable category:
High input costs in urban areas - High land prices in the municipal limits of the major cities (where urban affordable housing is most needed) make it unfeasible for developers to launch affordable housing projects there
Low buyer interest in peripheries - Lack of basic infrastructure in peripheral areas (where housing within Rs 45 lakh is feasible) discourages buyer interest, which curtails supply
Scarcity of land – The main ingredient for housing development is scarce in the main cities
Restrictive affordable housing criteria - The government has put an excessively limiting cap on what kind of housing qualifies for incentives and sops
Unlock government-held land for development:
Puri believes that across cities, some portions of land falling under the departments of Heavy Industries, Indian Railways, Port Trusts, etc. can be released by the respective government bodies. The infusion of low-cost land will also help curtail property prices.
Revise the price definition of affordable homes in top cities
According to Puri, “The government must seriously consider revising the pricing of homes that fall within the affordable housing price band, city-wise. While the prescribed unit size of 60 sq m carpet area is appropriate, the prescribed pricing restrictions are not viable across most cities except in the far-flung peripheries which lack liveability and accessibility.”
If this price restriction is widened, many more homes will fall within the affordable price tag and qualify. As a result, many more aspiring property buyers can avail the multiple benefits such as lower GST rates at 1% without ITC, government subsidies and the most recent tax deduction of total Rs 3.5 lakh on interest repayment of home loans. Such a boost to housing sales cannot come soon enough.
- Of total 1,39,490 units launched across top 7 cities in H1 2019, only 39,840 units fall within govt-defined affordable category criteria (60 sq. mt. carpet area & priced below Rs 45 lakh)
- Bengaluru, Chennai, Hyderabad and Kolkata together comprise just 15% share (approx. 5,820 new units) of total affordable supply in H1 2019
- Nearly 2.40 lakh unsold units across the top 7 cities as on Q2 2019 are affordable but many fall outside the government’s narrow ‘affordable’ definition