Marginal rate hike for Haryana government's affordable housing unlikely to impact demand

The recent marginal hike?of about 5 percent in the rates of housing units ,announced by the Haryana government in its Affordable Housing Scheme is not likely to pinch home buyers and unlikely to impact demand.

Haryana's Department of Country & Town Planning (DTCP) had recently hiked the rates of housing units under state government's affordable housing scheme by Rs 200 per sq ft. In 2014 when this scheme was launched, the Haryana government had categorized?districts into various?zones like Hyper Potential Zone, High Potential Zone, Medium Potential Zone and Low Potential Zone based on demand and fixed the rates accordingly. In Gurgaon which falls under Hyper Potential Zone , the rate was fixed at Rs 4000 per sq ft. This rate has been revised to Rs 4200, The revised rate in high potential zones is Rs 3600 per sq ft and in other zones, it has been fixed at Rs 3200 per sq ft.

The DTCP has justified the rate hike as these rates had remained unchanged despite inflation and substantial increase in the price of cement, steel and other raw materials besides increase in labour cost. The real estate marketing experts opine that it is?not proportionate increase and developers will still have to work on low margins.They strongly believe that the marginal rate hike of Rs 200 per sq ft will have little impact on buyers as this hike will work out to be Rs 80000-Rs 1.6 lakh for dwelling units of 400- 800 sq ft size.

The rate hike is not going to affect home affordability. Home loan rates continue to be at the decadal low and first time home buyers continue to enjoy interest subsidies of up to Rs 2.67 lakh. Considering that the affordable housing continues to be a major driver of residential real estate, the government, in the upcoming budget should provide further incentives like extending interest subsidy beyond March 31, 2022, cheaper bank funding, faster approvals, lower GST, more tax incentives to buyers and developers to keep affordability high to realize the goal of Housing for All.