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Source by google.com
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The Indian real estate market is very unorganized and has been affected by the lack of a regulator for many years. There has been a constant mismatch in demand and supply in the sector. However, one segment that has been a savior is affordable housing. The demand for affordable housing in India has been on the rise. Post the implementation of RERA the Indian real estate market has transformed.
Over the next five years, the sector is expected to witness a turnaround driven largely by the affordable housing sector. Nearly 95% of the country’s population is in the middle-income segment which has led to a huge demand for affordable housing, while the supply is still limited with only a handful of dedicated developers.
There are many developers in the premier and luxury housing segment which have huge profit margins, while in the affordable segment the margin is only 10%-15% only. Real estate also needs to move towards the volume first model to meet the increasing demand for affordable housing. Many home buyers are usually ending users and not investors so there are fewer changes in pricing fluctuations.
Properties in the affordable housing segment are not being bought for speculative purposes. On the other hand, affordable housing projects also have an appeal for an investor as these costs 25 – 30 percent less than other projects in the same vicinity.
With the implementation of RERA the direct involvement of government and defined project specifications has made affordable housing projects more attractive and secure for home buyers. The sector is now witnessing strict completion deadlines, and there are fewer opportunities for manipulation.
With easy possession transfer under RERA, the confidence of buyers has also increased in the sector. The low price also makes them properties more marketable, with the government dropping interest rates frequently to meet the needs of homebuyers. Public and private sector banks also extend the loans for affordable housing with ease.
Affordable housing projects in Bangalore, Pune, and Mumbai have seen encouraging sales over the last couple of years, despite gloomy sales in the real estate sector.
The Union Budget 2019 has made provisions that substantially push the demand for affordable housing. The finance minister has raised the tax deduction limit to Rs 3.5 lakh from Rs 2 lakh on interest paid on home loans for the purchase of first home worth up to Rs 45 lakh in the affordable housing segment.
The government has further announced that under PMAY-G, 19.5 million homes, will be equipped with amenities such as electricity, LPG connections, and toilets. These affordable homes will be provided to eligible beneficiaries till 2021-22.
All these steps taken by the Indian government have significantly boosted demand in the affordable housing sector. However, the road ahead is still tough with 15.3 million houses delivered from 2014-2018 under PMAY, which is very less to achieve the 2 crore homes target set by the government under Housing for all by 2022.
The cap of Rs 45 lakhs is also a hindrance in affordable housing, especially in metro cities where property rates even in the affordable segment have skyrocketed. This will help in steering the millennials and young professionals back to the trend of homeownership, which is otherwise becoming obsolete in today’s shared economy. Some incentives and regulations are still needed in the sector and real estate players also need to adapt to these changes to determine the sector’s eventual success.
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