Middle income Boost
Affordable housing has got a fillip with enhancement of carpet area

Last week, the Centre, enhanced the carpet area of houses under the Credit Linked Subsidy Scheme (CLSS) for the middle-income group (MIG) category under the Pradhan Mantri Awas Yojana-Urban (PMAY-U).

Experts believe it to be a big boost for the affordable housing segment, as well as the PPP model for affordable housing projects.

The step is also aimed at boosting sluggish sales in the overall housing sector. Real estate biggies and realtors’ bodies like the Confederation of Real Estate Developers' Associations of India (Credai) and the National Real Estate Development Council (Naredco) have hailed the move, which they claim would help middle-income buyers.

They said this move would give them value for money, and help developers to clear unsold stock as well as launch new projects and boost the economy.

The average middle class family would now be able to afford better quality and bigger homes. It will also have a positive impact on the affordable housing segment, apart from accelerate Housing for All for the urban poor by 2022.

Under the MIG-I category, the carpet area of the houses has been enhanced from 90 sq mt to 120 sq mt, while under the MIG-II segment, it has been increased to 150 sq mt from the current 110 sq mt, Union minister Ravi Shankar Prasad said, while briefing reporters about the Union cabinet decision.

For the MIG-I category, a four-per cent interest subsidy is provided to the beneficiaries with an annual income of Rs 6 lakh and Rs 12 lakh on a loan of up to Rs 9 lakh. Similarly, under the MIG-II category, the beneficiaries with an annual income of Rs 12 lakh and Rs 18 lakh get a three-per cent interest subsidy on a loan of up to Rs 12 lakh.

With these provisions in place, the government is expecting an enhanced expenditure of about Rs 1,000 crore to Rs 1,200 crore.

Real estate stakeholders said this latest Cabinet decision would induce more people in the MIG category to buy houses under the scheme.

In fact, many people preferred not to buy houses under the scheme, as the previous carpet area did not seem very attractive to them.

Now with the significant increase in carpet area, more homebuyers are likely to come forward to avail of the benefits, boosting affordable housing sector across the country.

Estimates indicate, India needs to build 19.6 million affordable homes to provide housing for all. Of this, 11 million are to be in the urban areas and the rest in villages.

Rajeev Talwar, chairman at NAREDCO and CEO at DLF and Niranjan Hiranandani, president at NAREDCO and MD at Hiranandani Constructions told Financial Chronicle that this decision would help in meeting the aspiration of millions of middle-income homebuyers.

“This decision of the government, besides helping in clearing unsold stock, will also encourage developers to launch new projects and boost the economy, GDP growth and employment,” the two said, adding that the move would now bring the entire demand for affordable housing under the interest subvention scheme.

“Housing for All by 2022 has taken a huge leap forward by the increase in unit size of MIG Houses under Credit Linked Subsidy Scheme,” Jaxay Shah, president at Credai, said.

J C Sharma, vice chairman and MD at Sobha, said it would help buyers in MIG category to have a wider choice from amongst the projects available in the market.

“It will enable the middle income group buyers to access benefits of the interest subsidy scheme. It will not only boost sentiments, but also offer much-needed inducement to the MIG buyers. Buyers in this category of homes will now have access to bigger and better quality homes than before,” he pointed out.

Sharma said this proactive step would address challenges of urban housing to a great extent and would also give confidence to the developer community in launching new projects. 

Rahul Nahar, founder-MD at Xrbia Developers, predicted that buyers sitting on the fence will now avail the benefit that this scheme offers. 

“Private developers now have more incentive to increase scale. There are very few promoters in the country who develop houses of lesser carpet area. With the increase in carpet area, more developers have joined the pool in accelerating ‘Housing for All by 2022’,” he said.

According to Anuj Puri, chairman at Anarock Property Consultants, the government move holds immediate and long-term benefits for a massive cross-section of Indian homebuyers, as well as for developers focused on such housing. “We will see a significant resurgence in demand, as bigger flats have now come under the purview of Pmay benefits. This comes as an added stimulus over and above the existing interest subsidy scheme. We will see developers notching up faster sales of their unsold inventory,” he pointed out.

The housing and urban affairs ministry estimates the prevailing shortage of urban housing at approximately 10 million units, which is a sizeable decrease from the 18.76 million units projected in 2011.

“The expanded definition of homes under PMAY comes at the right time and will definitely contribute significantly towards the government's ‘Housing for All by 2022’ mission, which is now beginning to look increasingly feasible,” Puri said.

Ashok Mohanani, chairman at Ekta World, said a majority of buyers in the Rs 18-lakh yearly annual income bracket, prefer to buy houses of up to 1,400 sq ft.

“The average middle-class buyer in smaller cities and towns will now be able to afford bigger and better quality houses than before. On the supply side, developers now have more incentive to increase scale and contribute to bringing about a new India,” he stated.  Shailesh Puranik, MD at Puranik Builders said he had recently seen a rise in homebuyers’ sentiments and with this decision a larger population will get covered.

According to Gagan Banga, VC and MD at Indiabulls Housing Finance, fence sitters, especially those delaying their home purchase, will now be given a further push.

“Builders, meanwhile, will not only enjoy the general uptick in the market, but can also accelerate the sale of housing units. The government has yet again delivered a further impetus for homebuyers, home suppliers and home financiers by easing the ecosystem,” he said.

Brotin Banerjee, MD and CEO at Tata Housing, said after the extension of interest subsidy under the CLSS scheme to MIG, the decision to approve an increase of carpet area eligible under this scheme will be an important financial impetus for buyers looking at ready-to-move homes, especially in high-density cities.

Said Ramesh Nair, CEO and country head at JLL India, said the amendment implies that if you are a home buyer, who qualifies for the Credit-Linked Subsidy scheme (CLSS) under the PMAY, you will have wider choices for your first home, not to mention that it may now be a lot bigger.

Many developers have welcomed this move, as it would not only help the sector in clearing unsold stocks, but also encourage new project launches, which have been slow since the advent of the real estate regulatory act (Rera).


Michael Gonsalves