The Credit Linked Subsidy Scheme (CLSS) was the Housing Ministry’s effort to dovetail finance availability into the Prime Minister’s vision of a liveable house for every Indian family by 2022
By: E Jayashree Kurup – Magicbricks
Over 1.66 crore applications for various credit linked subsidies for housing loans have been received through various channels by the government in the past few months. In a country where online internet penetration is a mere 37% overall and 62% urban, this data available with the Ministry of Housing and Urban Poverty Alleviation shows that digital access is not an issue. It may require some facilitation. However, that too, provides job opportunities and therefore, is a good economic activity to pursue.
The Credit Linked Subsidy Scheme (CLSS) was the Housing Ministry’s effort to dovetail finance availability into the Prime Minister’s vision of a liveable house for every Indian family by 2022. The interesting thing is that while earlier it was housing shortages that were being computed, today the extent of subsidy sanctions are being touted.
So how does every citizen avail the sanctions? The CLSS announced in a previous budget offered a 6.5% interest subsidy to be credited into the borrower’s account for the first Rs 6 lakh of loan availed for buying a house of 30 and 60 sq m carpet area, under the Pradhan Mantri Awas Yojana (PMAY). The family income of the buyer was to be within Rs 6 lakh. This amounts to a net subsidy of 21% for the applicant. For the first time the government efforts had been stretched to include the Lower Income Group (LIG) segment and not the social sector of the Economically Weaker Sections (EWS) alone.
The Prime Minister’s announcement on December 31, 2016, that two new credit subsidy schemes for the middle classes, MIG 1 & 2, was also announced ensured that the net was widened further. Now those with upto Rs 12 lakh annual income could avail of the housing subsidy of 4% and those with annual income levels of Rs 18 lakh could avail of subsidy levels of upto 3%.
This meant that if a young urbanite with a family income of Rs 18 lakh approached a bank for a loan, he or she would be eligible to seek loan for a house of upto about Rs 65 lakh. This accounts for over 55% of the stock that is actively traded and listed on property portals like Magicbricks.com. On this loan the borrower is eligible for a subsidy of 3% on the first Rs 18 lakh, if the loan has been availed after January 1, 2017. This effectively brings the rate of interest down from the existing 8.5%. “This makes it the best time to buy an affordable house in urban India,” said Amrit Abhijat, Mission Director, PMAY and JS (HFA).
While nay-sayers have been predicting the digital challenge, statistics show that over 30 lakh people, without any aid, have been able to come and apply on the HUPA website. When some states were found not to be pushing for more CLSS applications, the Common Service Centres, manned by IT literates was launched. They charge a facilitation fee of Rs 25 per application but 28 lakh people have applied, paying this charge. The National Housing Bank (NHB) is now determining the eligibility of these applicants and estimates that at least 80-90 lakh loans will be disbursed.
For the first time, the Middle Income Group (MIG) housing has got incorporated into affordable categories. However, stressed Dr P Jaipal, Sr Executive Director, HUDCO, “The MIG subsidies are for one year. If we struggle on interpreting the law for a long time, then time will run away. The industry needs to be facilitated to transfer to MIG and take advantage of the scheme, or the next year when the scheme is appraised, the verdict will be that it is not a success.”
Another concern raised by Dr Jaipal was that since it is easier for the developers to make money out of the MIG sector, the higher end of the LIG segment that was being addressed by developers may be neglected. One way of ensuring developer interest is to keep a percentage of priority lending funds from banks for constructing LIG housing.
This plea was echoed by the State Bank of India representatives who asked for the definition of affordability to be dovetailed into the priority sector lending.
With or without priority sector lending, banks such as SBI and HDFC are holding major sessions on CLSS for its staff. This is part of the preparation for a large number of disbursals. NHB, on its part, is now equipped to make the disbursals into the bank accounts of the borrower in two days, thanks to a massive digitising exercise that has won them an award as well.
With the Digidhan and other digital cash movements in the past, many informal sector workers now have a digital footprint that gives them a CIBIL score. This is already being used by microfinance lenders such as the SEWA bank to lend between Rs 1-3 lakh. The ministry is already in talks with the Indian Banks Association (IBA) to sort out the concerns of lending to the unorganised sector. A simplified application form and document process has been circulated by the IBA. However, appealed the ministry, finally the banks have to take a compassionate view when lending to those in the informal sector as they may not have too many documents to support their application.
If you are buying a house in resale markets from someone who has got a house using subsidy and is selling now that the lock-in period is over, you are eligible to be considered for funding under the subsidy scheme. But seller does not get more subsidy.
The PMAY was launched in 4011 statutory towns as per Census 2011. Now all states are adding more statutory towns, which now numbers 4300, to avail PMAY advantages. NHB, has now mapped all the localities in these cities to postal codes that will facilitate lending by the banks.
As the Secretary Dr Nandita Chatterjee stressed, “The entire purpose of PMAY is that those with no shelter should get a house and not to trigger speculation. So the schemes are all to facilitate purchase of the first house.”
With the inclusion of LIG and MIG in the fold of affordable housing, the government is clearly matching aspirations to resources to create a kind of ecosystem fuelled by incentives. They are available in 2017-18. The home loan interest rates too are low. Coupled with subsidies, they are the lowest in 20 years. But unlike in the Housing and Habitat policies of 1998 and 2007, when there was a lot of consumer facilitation and access to funds, this time round, the extent of the incentives is for a far shorter period.
Come 2018, all the incentives may not exist. Therefore, it is a good time to buy now if you don’t own a house.
Source: ET Realty
Under Construction Flat Booking Finds Tax Deduction Under Time Constraints
If a buyer makes a transaction to book an under-construction flat and if he acquires it within the three-year period of the sale of his old house, then he is entitled to a tax deduction, says a ruling from the Mumbai bench of the Income-tax Appellate Tribunal (ITAT). If an apartment is booked in an under construction project than it must be viewed as a method of constructing residential tenements, says the December 18 judgment.
That means if the buyer uses the entire gain from the transaction to buy another house within two years or construct another house within three years. The two- and three-year period applies even if the buyer bought another house a year before selling the first one. But the property should have been bought in the name of the seller.
It is mandatory that within a period of two years after or one year before the date of transfer of old house, the taxpayer should construct a residential house or acquire another residential house within a period of three years from the date of transfer of the old house. The date of receipt of compensation will determine the period of acquisition or construction in a case of compulsory acquisition.
This exemption is effective and can only be claimed in respect of one residential house property purchased/constructed in India. In the case of multiple house purchases or constructions, the exemption under section 54 will be available in respect of one house only. Any purchases made outside the country does not fall under any kind of exemption. Section 54 gives relaxation in such cases by providing relief to the taxpayer who sells his residential house and acquires another residential house from the gained capital.
After the sale of an asset, the difference between the buying price and the selling price is a capital gain or a capital loss. These are further classified as long-term or short-term. If a property is held for 24 months or less, with effective from 2017-18, then that asset is treated as Short Term Capital Asset. Then an investor can make
treated as Long Term Capital Asset. Then only a Long Term Capital Gain (LTCG) or Long Term Capital Loss (LTCL) can be made on that investment.
ITAT agreed that booking of a new flat in an under-construction apartment should be considered as a case of “construction” and not “purchase”, hence following the earlier decisions of the Bombay high court and the tribunal itself. Further ITAT allowed the fact that the construction can began prior to the date of sale of the old asset. Same was stated in the earlier judicial decisions of the Karnataka high court and Ahmedabad ITAT, that the date of commencement is not relevant but it is the completion of construction that comes in relevance to section 54.
HDFC and Quikr Make A Deal
According to a deal between HDFC and Quikr, a stake of more than 3 percent will be given to the mortgage giant in return to its transfer of offline and online real estate brokerage business to the classified ads platform.
After acquiring Commonfloor in 2016 Quikr already has a major presence in online real estate broking.
“Most of the searches for real estate are moving online. Quikr has a much bigger presence online. Through this deal, we are partnering Quikr in the broking business,” said HDFC MD Renu Sud Karnad. According to her, this deal will strengthen Quirks position with offline support.
The deal suggests that HDFC will transfer to Quikr its entire shareholding in HDFC Realty, a real estate brokerage platform, and HDFC Developers, which runs the HDFC RED online platform.
Karnad added that the deal expects Quikr to generate home loan leads for HDFC. The transaction consists of a co-branded alliance between both parties and the HDFC brand will continue to be used online for a year.
The e-real estate classifieds platform HDFC RED has around 7,000 project listings and generates traffic of over 80,000 unique visitors per month. HDFC Realty has a 300-member, in-house sales team, and 7,000-strong nationwide broker network. Avendus Capital was the exclusive financial adviser to Quikr while Kotak Investment Banking acted as the exclusive financial adviser to HDFC on this.
30 million monthly users make Quikr India’s largest classifieds platform. It runs multiple vertical businesses across real estate, automobiles, jobs, services, and goods. The Quikr Home, its real estate vertical generates 3.5 million monthly unique visitors.
Both companies intend to work closely and conduct analytics and identify potential homebuyers, and therefore home loan customers, early in their home-buying journey. Quikr founder and CEO Pranay Chulet said, “We see great synergies between Quikr and HDFC as we start working together to bring a seamless online-to-offline platform to developers and consumers.”
Retaining The Sustainability: GRIHA Launches Star Rating For Urban Homes
Green Rating for Integrated Habitat Assessment (GRIHA), is the National Rating System of India, a Sanskrit word meaning – ‘Abode’. Human architecture has always consumed resources in the form of energy, water and material from the environment. From their construction to operation, these habitats absorb the resources throughout their life cycles, emitting wastes in the end. This emission could be direct in the form of municipal wastes or indirect emission into the atmosphere, such as from electricity generation. Hence GRIHA was formed to reduce an architecture’s resource consumption, waste production and overall environment impact up to certain national acceptable limits.
In attempt to quantify all these aspects, like energy consumption, waste generation etc. GRIHA tries to manage, control and bring down the respective to the best possible limit. Being a rating tool, it helps people to assess the performance of their respective projects against the national benchmarks.
Hence it becomes an evaluation of the environmental performance of an architecture on a holistic level. Covering its entire life cycle, this evaluation provides a specific standard for a ‘green building’. This rating system aims to strike a balance between established institutions and emerging concepts, on a national as well as the international level.
The process starts with an online submission of documents according to the criteria. Then a team of professionals and experts from GRIHA Secretariat takes a site visit for the evaluation of the building. There are four different sections categorized by 34 criteria in GRIHA rating system. Some of them are site selection and site planning, conservation and efficient utilization of resources, building operation and maintenance, and innovation.
Sanjay Seth, CEO, Green Rating for Integrated Habitat Assessment (GRIHA) Council says, “A rating between one and five stars is being provided, helping the costumers to know about the sustainability of the houses”.
According to the Union Minister, Hardeep Singh Puri, the climate resilient and sustainable buildings are the need of the hour. As the government is aiming to construct around 1.2 crore houses for the urban poor under the affordable housing scheme.
In one of his keynote addresses, Andreas Baum, Ambassador of Switzerland to India and Bhutan said that the Indo Swiss collaboration is operating with the Indian Bureau of Energy Efficiency in the development of guidelines for energy efficient housing.
“At present India is witnessing a rapid urbanisation, if each building becomes greener than the last one, then we have a huge opportunity and hope for our country. We need to look beyond the conventional methods of building, in order to provide our citizens with a good quality of life. Hence, GRIHA gains important in meeting our national goals with respect to a sustainable society”, says Dr Ajay Mathur, director general, TERI & president, GRIHA Council.
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