How Infrastructure Status to Affordable Housing Is Beneficial to Both Developers and Home Buyers

In order to revive the slump-hit real estate industry, the Union Budget 2017 put-forward an announcement which was a win-win for both home buyers and developers. The finance minister granted an infrastructure status to affordable housing, this move is directed to give a boost to affordable housing. This proposal has been received positively by the real estate industry – right from middle-class home buyers, developers and home loan providers. The final aim of the Affordable Housing Sector Infrastructure status is to boost government’s target of providing housing for all by 2022.

Let’s get to know what benefits will be derived by real estate developers and home buyers:

Higher investment in affordable housing:

The union budget 2017 also proposed that NBFC will provide up to Rs. 20,000 crores of individual loans. The affordable housing means probability of high investment opportunities as home buyers can avail loans at a cheaper rate. It is predicted that a lot of players and new lenders will emerge with this move as interest rate moves downwards, resulting in high demand for residential real estate.

Tax exemption for developers:

Developers will get some relief from tax. The profits earned by builders will not have to pay taxes for the five years. Tax incentives alloted for infrastructure projects will result in decrease in prices. The demand for affordable homes is likely to increase given the extra cash people will have in hand due to proposed deduction of the income tax rate to 5% for taxpayers earning less than Rs 5 Lakh.

Carpet area will be counted instead of built-up area:

The biggest change under the budget was inclusion of carpet area, instead of built-up area. Carpet area of 30 sq meters limit will apply in case of municipal limits of metropolitan cities, while 60 sq meters will be the limit for the rest of the countries. This will ensure spacious home. The carpet area rule is likely to impact under construction projects to meet the afford-ability criteria.

Interest subvention:

Under Prime Minister Awas Yojana (PMAY), the government will provide the interest subvention of 4% and 3% on loans up to Rs. 9-12 lakhs. This is said to provide good boost to mass housing in all eight metro cities across the country.

Affordable housing has caught the attention of many private equity funds and it is also getting inquiries from overseas investors, even before the announcement of union budget 2017. it is also expected that equity funds and foreign investors would increase their stakes in the real estate sector. In short, the budget has got positive measures for developers, consumers and investors.