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Pradhan Mantri Awas Yojana: affordable homes could finally be within your reach

real estate Updated: Jan 13, 2017 19:38 IST

Will changes announced by the prime minister in the Awas Yojana finally make housing affordable for people who can now only dream of a home of their own?

Real estate is expensive in Delhi NCR, but people aiming to buy an affordable home for Rs 20 lakh may finally do so – and that too for a 2BHK house, thanks to changes likely in the Pradhan Mantri Awas Yojana (PMAY).

On December 31, prime minister Narendra Modi announced an additional subsidy on home loan interest rates. The government will hereon facilitate 4% and 3% interest rate rebate for housing loans of up to Rs 9 lakh and `12 lakh, respectively. Also, loans of up to Rs 2 lakh for new housing or property extensions in rural areas will get an interest subvention of 3%.

The current loan limit for this scheme, restricted to people belonging to the economically weaker sections (EWS) and lower income groups (LIG), is Rs 6 lakh. It will now be expanded (See box). Real estate experts say that the impact of the likely changes would be greater with slashing of interest rates by banks as more people from the lower part of the social pyramid access housing. They would also get loans at subsidised rates. The biggest challenge however would be creating enough stock to meet the rising demand in the affordable housing segment.

Experts also point to the fact that affordable housing is expected to lift the gloom engulfing the realty sector following demonetisation.

The current unsold inventory in the real estate market (of MIG and HIG units) is around 11 lakh units in the metros and the irony is that there is a shortage of about 1.80 crore units in the affordable housing segment. This demand and supply gap needs to be bridged as the current supply of affordable housing is only three lakh units. “There is almost a 98% shortage of units in the affordable housing segment,” says Pankaj Kapoor of Liases Foras.

Through the PMAY scheme the government is acknowledging the housing shortage in the segment and admitting a need to plug the gap. Under the amended scheme any first-time homebuyer requiring a loan of `9 lakh and `12 lakh can get a subsidised one for 15 years.

“With a 4% subvention, homebuyers’ EMIs will be reduced by almost 20%, which means that affordability will improve as interest rates have also been reduced. Going forward, one may see more builders getting into the segment,” says Kapoor.

Affordable housing is also likely to be the first asset class to lift the gloom in the residential sector leading to improvement in the markets in the last two quarters of 2017. The budget too could have some incentives for the affordable housing segment such as exemptions on stamp duty and income tax, he says.

Almost two months after demonetisation hit the real estate sector, homebuyers will finally be able to take a decison on buying property now, especially with regard to affordable properties available in Tier 2 cities with interest rates going down and subsidies available for home loans for first- time homebuyers, says Anckur Srivasttava of GenReal Advisers.

So is this a right time to finalise property deals? Harsh Roongta, chartered accountant and a SEBI-registered investment adviser, suggests that people looking for properties should wait until June but take decisions about the property and the location they want to invest in.

The government will hereon facilitate 4% and 3% interest rate rebate for housing loans of up to Rs 9 lakh and Rs 12 lakh, respectively. Also, loans of up to Rs 2 lakh for new housing or property extensions in rural areas will get an interest subvention of 3%.

“If you are planning to go in for the PMAY scheme, remember that the Real Estate Regulatory Act (RERA) is expected to come into effect from May 1 and by that time the impact of demonetisation will become clear. My advice to homebuyers is that they should ideally wait until June to finalise deals. Along with the PMAY scheme, the cut in interest rates by banks will make more people eligible for a housing loan as housing will be more affordable and EMIs will be low. If interest rates come down homebuyers will also be able to avail higher loans,” says Roongta.

Here’s how a Rs 15 lakh house with a total loan amount of Rs 12 lakh stack up after the new PMAY. announcement.

Other realty experts are of the opinion that buyers should get down to signing on the dotted line now as there is enough scope for negotiation if they sit across the table with the developer to finalise the deal. This may not be possible once the situation improves and too many buyers enter the market.

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