Affordable Housing New Norms Could Be A Game Changer For Real Estate Sector


Affordable Housing New Norms Could Be A Game Changer For Real Estate Sector

As yet another commendable new norms in affordable housing that aim to provide housing to more and more people, the carpet area of houses under the Credit-Linked Subsidy Scheme (CLSS) has recently been increased by 33 per cent for the Middle Income Group (MIG). However, there is a cap over the maximum value of the property that would be eligible for the benefit.

For MIG I, the carpet area has been raised to 160 sq mt (1,722 sq ft) from 120 sq mt (1,291 sq ft) for families in the income range of Rs 6-12 lakh. For MIG II families, the carpet area has been increased from 150 sq mt (1,614 sq ft) to 200 sq mt (2,153 sq ft), for those who are in the income range of Rs 12-18 lakh.

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This has been done keeping in line with the Reserve Bank of India’s recently-announced decision of revising housing loan limits under Priority Sector Lending (PSL) eligibility from Rs 28 lakh to Rs 35 lakh for metropolitan centres and Rs 20 lakh to Rs 25 lakh for other urban centres, given that the overall cost of the dwelling unit doesn’t exceed Rs 45 lakh and Rs 30 lakh, respectively. And the buck stops here.

It is nearly impossible to get a housing property measuring 2,153 sq ft under Rs 45 lakh in a metropolitan city and most tier-II cities. However, there are possibilities in the tier-III and other smaller urban centres to have such large units in the range below Rs 30 lakh. This is why the move is primarily going to benefit homebuyers in these towns only.

It is not that this fact leaves the new changes of little impact. In fact, these new norms could be a game-changer for the real estate sector in these towns and thus in overall. It is no secret that small towns are burgeoning as the economic power centres driven by low and middle-income groups. Thanks to their evergreen domestic economy which remains vibrant regardless of the global and national economic conditions.

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This aspect was fairly revealed during the recessionary periods in 2008-12 quite strongly. Even if some other industries, including the e-commerce sites, were taken into account, studies have revealed that the small towns are relatively growing faster in terms of consumption than the large cities.

Of course, there are certain challenges with respect to the availability of financial products to homebuyers in these towns, and that is where the CLSS-backed PSL home loans will come into play.

What needs to be underlined here is that loans under PSL are less expensive than those provided by banks generally. It is important to note that for MIG I, while the eligible housing loan amount is Rs 9 lakh, the upfront housing amount for subsidy is Rs 2.35 lakh, with the interest subsidy at 4 per cent. For MIG II, the eligible loan amount is Rs 12 lakh, and the upfront amount for subsidy is Rs 2.30 lakh with the interest subsidy fixed at 3 per cent.

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Considering that MIGs form a substantial portion of our society, the increase in carpet area of houses could mean millions of people now becoming eligible for the housing subsidy schemes and this will have a transformational impact on not just the real estate sector in India, but the entire economy as a whole.

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