Affordable Housing

As the general elections are going to be held in April and May 2019, the Government has started initiating on providing affordable housing to the MIG (Medium Income Group) segment of the society. Recently, Government also announced to cut down the GST rates in the real estate sector to boost the housing demand. This GST reduction may result in increase in sale of houses across the nation. Through affordable housing scheme, Medium Income Group (MIG) segment are offered newly constructed houses or apartment at comparatively cheaper rates.

Affordable housing or low cost housing is a scheme in which people with low income, rated by local or national governments are offered houses at cheaper prices. Low cost housing depends on three factors, such as income, size of house/property and affordability. Forms of affordable housing include indigenous housing, subsidized housing, emergency shelters, and formal and informal rental.

Majorly, developing nations are more in need of affordable housing because of increased population and low per capita income of their citizens. In these nations people do not possess high purchasing power or reasonable monthly income. Therefore, government takes the responsibility in granting houses at cheaper rates to the families of developing countries. Government contacts various developers and public-private partnerships for the development of residential units.

The prime reason of the need of affordable housing is the inward migration of families from rural and semi-urban to urban areas. Presently, affordable housing sector is facing a shortage of 10 million units in urban areas only. Moreover, the affordable sector is nowhere near in fulfilling this ever increasing demand.

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Initiatives by Government of India for affordable housing

Below mentioned are some of the initiatives and policies undertaken by government for Affordable Housing:

1) Prime Minister Awas Yojana (PMAY) Urban

Introduced in 2015, The Pradhan Mantri Awas Yojana (PMAY) scheme was launched by Central Government that wish to provide ‘Housing for All’ in urban areas by the end of 2022 through PMAY-U. This scheme is implemented across various financial institutions. PMAY provides central assistance for all eligible families across the nation. Majorly this scheme is classified on the basis of annual income and size of house. Its primary features include:

• To enhance the purchasing power of the large number of families across the nation by providing interest subsidies.
• Families may get interest subsidies on their home loan based on their income category.
• Families with pucca house are eligible to apply for PMAY. Any of the family members should not own a pucca house in any part of the country.
• Amount can be used for the renovation of current kucha house or semi-pucca house or in the acquiring or purchasing of a new house.

Check: PMAY Online Application Process for New Applicants & Existing Home Loan Borrowers

2. External Commercial Borrowing (ECB)

From 2012, External Commercial Borrowing has been allowed for affordable housing projects. These borrowings are permitted to enable lower interest rate for developers and confirmed improved capital availability for developers of low-cost housing.

3. Opening up of Foreign Direct Investment (FDI)

FDI was permitted for development of construction development, housing, townships and built-up infrastructure. However, not much grip has been seen in the Affordable Housing segment uptil now.

4. The Central Board of Direct Taxes (CBDT)

Under section 35AD of Income Tax Act, CBDT has offered the benefits of section 35AD (permitting 150% of capital expenditure as tax deduction) for affordable housing. But actually there were no takers of this scheme as developers / builders have nominal costs capitalized in their accounts as capital costs.

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Also Check: Home Loan EMI Calculator

Let’s now get familiar with the Eligibility of Affordable Housing as an applicant:

• Applicant should be Indian citizen
• Applicant should be between 18 years to 70 years
• Applicant should not have own any apartment/plot/house anywhere in India
• People who have already benefited from this scheme are not eligible to apply again

Documents required, if individual applicant

• Duly filled and signed application form
• PAN Card
• Voter’s ID
• Address Proof
• Passport size photographs

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Documents required, if company

• Duly filled and signed application form
• Board of resolution
• MOU (Memorandum of Understanding)
• PAN Card

Housing sector is expected to raise approximately 30 million units by the end of 2022. Urban migration has resulted in shortage of basic necessity that includes water and sanitation, etc. Due to lack of affordable housing and mismatch of demand and supply, migrated labour and poor people are forced to live in slums and temporary shelters. The mission of Housing for all 2022, if not accomplished will put a negative impact on the economic growth of the country. To accomplish this aim Government has suggested developer and private builders to primarily focus on Middle Income Group (MIG) and Lower Income Group (LIG) of the society.

Affordable Housing scheme that is a state subject creates hurdles in the implementation because of unwarranted financial condition of development authorities. These authorities possess limited capacity in handling these projects. Strong collaboration between central and state governments, financial institutions, ministries, urban local bodies and private sectors is required to build up affordable housing at low cost with sufficient safety standards. Housing for all is portrayed as the silver lining for medium and low income group families, for them to own and possess their home by 2022.

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