Can affordable housing become the largest segment in residential real estate?
Over the past one or two years, the major cities across the country have seen a significant rise in affordable housing projects. According to a white paper by KPMG, titled ‘Indian real estate: Unfolding the new era of growth’, the affordable housing segment is likely to grow by over 30 percent, over the medium term. Owing to low-interest rates, various sops from the government, and demand from consumers, development firms are now looking into this segment, which was once considered to be a low-profit segment by many in the industry.
Pradeep Aggarwal, chairman, and co-founder – Of Signature Global Group and chairman – of the Affordable Housing Council of ASSOCHAM explains how “There has been a significant rise in the number of affordable housing launches, in comparison to the last couple of years and there is a profit margin in these projects.”
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Demand and supply
“Developers have realized that the demand for affordable housing is high. So, they have started paying much-needed attention to this segment,” says Aggarwal, whose company has announced over 9,000 affordable units in Gurugram and plans to bring 20,000 more in the future. The government’s agenda of ‘Housing for All by 2022’, has also encouraged a large number of developers to eye the affordable segment, which has huge growth potential, adds?RK Arora, chairman, of Supertech Limited. “Demand for?home loans?in the affordable segment has also seen an uptick. There has been an increase in the number of queries, which will in turn lead to sales, in times to come,” he maintains.
Arora also credits the government’s subsidy scheme for boosting the segment. “Under the CLSS, beneficiaries are extended interest subsidy of 4 percent (for MIG with an annual income of Rs 6-12 lakhs) and 3 percent (for MIG with an annual income of Rs 12-18 lakhs). Moreover, some builders are tweaking their unit’s ticket size, to make it affordable and to avail of tax benefits,” he points out.
If the government lowers the rate of GST (Goods and Services Tax) on affordable housing, from 12 to 8 percent, as has been suggested in some quarters, this could benefit the development firms and eventually,?reduce the rates of housing.