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To promote affordable housing in India, the government is taking corrective initiatives lately. The property prices have escalated substantially over the last few years due to which home buying had become an unaffordable proposition. To meet this demand gap and to provide ‘Housing for All’ by 2022, the government is focusing in this key area at present.
The Prime Minister had announced to provide rebates on home loans under the Pradhan Mantri Awas Yojana (PMAY). This move has come at a time when the real estate in India is reeling under the pressure of a slowdown. Having said that, the government has even made sure that it would monitor builders in order to fast track project completion and ramp up Indian real estate growth.
Under PMAY, the government is providing 4 per cent subsidy on the interest rate for home loans of up to Rs 9 lakh, and a 3 percent subsidy on home loans of up to Rs 12 lakh. Through this step, the key motive of government is to promote affordable housing in India.
Lending rate cut by bank:
After asked by the government, many banks have reduced their lending rates recently. The Finance Ministry has reiterated that the banks need to cut its lending rates because the Reserve Bank of India (RBI) has provided relaxation on its key policy rates. Until this New Year, not many banks reduced their rates. If few did, it was not a sharp cut. Most of the banks have a high rate of interest, which is unreasonable for the homebuyers since property prices are on the higher side too.
The real estate confederation has requested the government and the banks to lower down lending rates so that it can help them to reduce their existing unsold inventories. Also, the lower lending rates will boost homebuyers’ confidence and interests in the property market, thereby, reviving the market sentiment.
The State Bank of India (SBI), which is India’s largest bank, has recently reduced its marginal costs of funds based lending rates (MCLR). SBI’s home loan rate has witnessed a sharp fall lately. In its last review, RBI has kept its repo rate unchanged due to economic pressure and slow GDP growth. At the beginning of 2017, the banks finally reciprocated and reduced their lending rates to provide some relief to the home loan borrowers. Due to demonetization, the bank deposits were flooded with money, which compelled bankers to reduce both deposits and lending rates.
SBI’s new lending rates are at 8.65 percent against 9.55 percent earlier. Similarly, many other banks such as ICICI, Punjab National Bank, Dena Bank have all reduced their lending rates, which is quite attractive for the home loan borrowers.
Such steps will enhance new launches in the affordable housing segment. In fact, the new rate of interest by banks will also help to fulfil the dreams of the first time homebuyers to purchase affordable properties.
Effect of Union budget on Affordable housing segment:
The government has given ‘infra’ status to the affordable housing segment in the Union Budget 2017-18. This would enable developers to raise funds at lower interest rates. It will provide volume boost in construction activity across the country and act as a catalyst to meet the objectives of Housing for All by 2022. It will attract foreign investors, good companies and external commercial borrowings into the segment.
The criteria for affordable housing has been modified from built-up area of 30 / 60 Sq Mts to carpet area of 30/60 Sq Mts in the Union Budget announcement on February 1, 2017. This step has made the low-cost housing segment more lucrative for the homebuyers and developers. Now, the homebuyers will get spacious homes and builders will to cater to a larger segment of buyers.
Many developers in the country have started their voyage to build homes under PMAY. One such developer is Wave Infratech, who will develop affordable homes which will have initial pricing of INR 8.4 lakhs and is named “Swamanorath”.
Also Read: How to Select a Suitable Apartment in Ghaziabad
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