Tag Archives: Infrastructure status to affordable housing

Populist budget & challenges of affordable homes

Posted on by Track2Realty
Track2Realty Exclusive

Bottom Line: Contrary to the hype of affordable housing around the Union Budget 2017-18, many Indians across the cities are questioning how the budget has addressed the core issue of affordability.

Union Budget, India real estate news, Indian realty news, Property new, Home, Policy Advocacy, Activism, Mall, Retail, Office space, SEZ, IT/ITeS, Residential, Commercial, Hospitality, Project, Location, Regulation, FDI, Taxation, Investment, Banking, Property Management, Ravi Sinha, Track2Media, Track2Realty“Siddharth Chopra, a Mumbai resident has been glued to the television news channels during the live telecast of the Union Budget 2017-18. Like the rest of the Indians expecting the budget bonanza for the middle class affordable homebuyers, he is now rather confused as most of the analysts are debating how the Union Budget has addressed the pertinent issue of affordable housing.

“It is no doubt a populist budget that may earn goodwill to the government in terms of getting media headlines and garnering votes in the rural areas. But for people like us living in the metro cities, I wonder how the budget has addressed the concerns of affordable housing. The government might have redefined the affordable housing by increasing the size of the carpet area and giving it the infrastructure status, but that will address the concerns of the developers. What about the homebuyers?” questions Siddharth.

Like this confused homebuyers, many Indians across the cities are today asking this questions as to how the budget has addressed the core issue of affordability. Affordability for a common affordable homebuyer is more about the pricing than the size of the apartment. As per the standard definition of affordable housing, any house that costs more than 5 years of gross income of the buyer with the second simultaneous condition that the EMI should not cost more than 50% of the take home salary is not affordable.

Another definition often floated in the Indian context is that any house that costs approximately 20 years of rental value is affordable. The budget, if seen with the right context of affordable housing in the major cities of India, fails to answer these much-needed affordable requirements of the Indians.

Beyond symbolic relief for affordable housing

  • Increasing the size of affordable housing without reducing the price does not address the concerns of affordable housing
  • No relief in Service Tax, VAT is a dampener for affordable housing
  • No incentive for developers to reduce the pricing and make houses affordable
  • Budget fails to redefine affordable housing and low cost housing in terms of price point

The developers are nevertheless happy as the budget has addressed their concerns to a large extent. JC Sharma, MD & VC of Sobha Limited points out that the focus on affordable housing is laudable, as it has been accorded the infrastructure status which will have many ripple effects.

“Government’s proposal to take into consideration the carpet area of 30 and 60 sq. metres instead of built-up area of 30 and 60 sq. metres (as was the case earlier) of the houses is a welcome step, whereby 30 sq. metres limit will apply only in case of municipal limits of 4 metropolitan cities, while for the rest of country, including the peripheral areas of metros, limit of 60 sq. metres will apply. This will allow developers to plan their future projects within the 60 sq. metre carpet area, which will boost the housing sector immensely,” says Sharma.

Ashish Puravankara, Managing Director, Puravankara Limited believes the budget has spelt out roadmaps and allocations across various initiatives of the Central Government and the Finance Minister has done an excellent job of managing the expectations. According to him, revision of Built-up area to Carpet area is a great move to push for apartments in affordable housing category.

“The according of Infrastructure Status to the Affordable Housing will boost investment in this category. Extension of period for carrying forward the MAT Tax from the existing 10 years to now 15 years is a welcome move,” says Puravankara.

Kishore Bhatija, MD – Real Estate Development, K Raheja Corp says the government has been working towards boosting the affordable housing segment and the announcements made today are in line with their objectives. The infrastructure status to affordable housing sector is a quantum step for the development of housing.

“In addition to this, the tax relief for developers on unsold inventory is a positive step resulting in lowering the burden on their shoulders. The changes in income tax slabs are a welcome move which will leave more liquidity in the hands of consumers boosting consumption,” says Bhatija.

However, beyond the euphoria of the budget sentiment within the built environment of the Indian real estate, the fact lies that the budget has not addressed the key concern of affordability of the average homebuyers in the major cities of India. Moreover, there is hardly any substantial focus on job creation which has a direct linkage with the housing consumption in the cities, especially the affordable housing.   

By: Ravi Sinha