Affordable Housing

Big push to real estate with affordable housing

Affordable housing scheme spread cheer in the real estate sector even though the budget did not meet the expectations. Pradhan Mantri Awas Yojana (PMAY) is the new initiative to provide housing for all. The goal of ‘housing for all by 2022’ is on track as the government intends to build two crore houses under this scheme – one crore houses in the first phase till 2019.
Last year, the affordable housing segment was given industry status in the Union Budget and support from the Centre under the newly introduced regulation in the Pradhan Mantri Awas Yojana (PMAY).

With the setting up of a dedicated fund for this purpose under the National Housing Bank (NHB) for priority sector lending, the demand will now escalate as home buyers get the ease of credit for affordable homes.

Some of the key features of the scheme are:


One of biggest gains from PMAY is the rate of subsidy. Interest rates for home loans are generally around 10 percent in banks. With PMAY scheme, a 6.5% subsidy is given to an individual. This indirectly reduces the monthly instalments one has to pay. This subsidy has a major positive impact on the middle-income segment as well as the economically underprivileged.

     Housing For All

According to the Pradhan Manti Awas Yojana, the government plans to construct two crore affordable houses across the urban areas of the country. Construction of these affordable houses has already commenced in Maharashtra, West Bengal, and Tamil Nadu. This scheme is promoted as a key initiative to upgrade the standards of living. Considering that 60 percent of the population lives in rural areas, it is a golden opportunity for all.

     Development of Nation

The PMAY will benefit the citizens from the rural areas. These projects boost the lower income and mid-income segment. Besides, they have a great impact on the real estate sector and the allied industries. It also creates employment opportunities in construction.

     Additional Benefits

Women who come under the low earning groups will get special benefits while availing housing schemes. Provisions have been made for widows, transgender, senior citizens and differently abled people. Seniors can get flats on the ground floor to avoid discomfort.
Since it is one of the pet projects for the government, it wants to deliver 10 million houses under this program at the earliest. Out of 10 million, 95 percent of the houses are to be built for Economically Weaker Sections (EWS) and Low Income Groups (LIG).

As the value of the house and the affordability of this particular segment is low, the impact of slightest upward cost pressure is magnified. The current GST rate of 18 percent coupled with 1/3rd abatement for land adds immense pressure on the overall cost of the house. GST on affordable and low-cost housing units must be lowered from 12 percent, with 50 percent abatement for land. As a result, the effective GST rate comes down to 6 percent. This provides a boost to housing for all by 2022. Also, there is a focus on connectivity to boost real estate. The outlay for roads, railways, and airports has been enhanced.

It is evident that the affordable housing scheme can stimulate the real estate sector. It has already been welcomed by developers who believe this is a concrete step to transform the sector instead of merely offering sops to it.

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