Raise affordable housing cap to Rs 1 crore, realtors demand from Finance Minister Nirmala Sitharaman

As demand for affordable homes take a hit post-COVID, realtors are demanding revision of the price cap on such projects that may help draw more homebuyers into the segment. Leading realtors and other industry stakeholders have put forward several demands from the Finance Minister Nirmala Sitharaman to revive the affordable housing segment.

Increasing the Rs 45 lakh price cap on affordable homes is one of the key demands from the upcoming union budget that will likely be tabled by the FM on 1 February. According to Niranjan Hiranandani, Vice Chairman of industry body NAREDCO and Chairman of real estate major Hiranandani Group, it's high time the price cap on affordable homes is increased, especially for metro markets. “Affordable housing should be capped upto Rs 1 crore in metro cities as broader spectrum of homebuyers can avail the benefit of CLSS (credit liked subsidy scheme), as industry witnessed growth of first-time homebuyers post pandemic. “granting infrastructure status to avail long term cheap funding as this interest rate sensitive sector is grappling with inflation led high cost of credit borrowings. This will allow developers to build and deliver housing projects at an affordable cost,” he said.

“The real estate industry is expecting higher incentivization of affordable housing, uniformity and expansion in the definition of affordable housing, increase in tax exemption on interest paid on home loans, and exemption on rental incomes. With more homes qualifying as affordable housing, the benefits such as lower GST at 1 per cent without ITC, and other government subsidies will help a lot more Indians seeking to buy a home,” said Manish Mehan, CEO and MD of TK Elevator India.

According to Anuj Puri, Chairman of Anarock Group, the government must offer more incentives to boost affordable housing. As the pandemic derailed the affordable housing growth story since early 2020. It is the one segment, which the current government has rightly stressed on since taking charge in 2014.

However, “affordable housing supply by private players has reduced significantly since Covid-19, largely because its buyer class was impacted economically and hence went into wait and watch mode. Now, there is a need to make this segment attractive again, not least of all because it resonates well with the government’s housing for all initiative,” he said.

Puri said that the government should seriously consider revising the price bandwidths for homes to qualify as affordable housing to align with the market dynamics of different cities. The size of units as per the current definition (60 sq. m. carpet area) is fairly appropriate, but the catch-all pricing band of up to Rs 45 lakh for affordable housing is definitely not appropriate across most cities.

“For instance, a price band of Rs 45 lakh or below is far too low in a city like Mumbai, where it should be increased to Rs 85 lakh or more. In other major cities, the qualifying price band should be increased to Rs 60-65 lakh. Similarly, in NCR, buyers have to go out to the peripheries to buy affordable homes which are unfortunately not very accessible via public transport or fairly low on liveability index,” he added. Such a move would have more homes qualifying as affordable housing, and many more homebuyers would be able to avail the current benefits like reduced GST at 1 per cent without ITC, and other government subsidies.

According to Piyush Gupta, Managing Director, Capital Markets and Investment Services, Colliers India, a price band of Rs 45 lakh or below is too low in a city like Mumbai, Bangalore, or Gurgaon and should be increased to be made according to the city’s pricing and affordability. “The limit needs a relook considering this hasn’t changed for many years and ready reckoner price, raw materials cost has increased,” said Gupta.

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