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Affordable Housing: The Realty Game Of 2018

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Affordable Housing

With promising returns for better opportunities in the real estate sector, developers and realty companies are expecting the affordable housing segment for boosting up the drive, in the year 2018. Government’s support by providing grants to the infrastructure in the affordable housing segment, has boosted the demand among the consumers, hence favouring the flourishment of such projects in India. With property pundits predicting a phenomenal growth rate of over 30% in the medium term, the affordable housing segment is expected to be the next big growth driver of the Indian economy.

 

After the implementation of the Real Estate Regulatory Act (RERA) and GST, the launch of new homes by realtors has been a slump. The new launches have come down by 35 percent since the year 2016. In comparison to that, the supply of affordable homes went up by 27 percent as the government extended interest subsidy and granted a special infrastructure status to the real estate sector, giving developers access to cheaper sources of funding, including external commercial borrowings (ECBs). The supply of affordable homes increased from 20,485 to 26,081 houses in the corresponding period last year. 40 percent part of affordable housing projects, among these new launches, was launched in Mumbai, followed by Kolkata and Pune.

 

The subdued demand and low sales, post demonetisation have been here for some time but the real estate sector is supposed to gain renewed momentum in the coming year. There is a sudden increase in the number of high net worth individuals and the long-awaited buyers’ confidence post-RERA, will further push the long-term demand for luxury housing.

 

This change in trends has motivated the established developers to expand their scope of business categories. Many of the branded developers in the high-end luxury segment, are now expanding their focus on compact, efficient homes for high and mid-level income category of buyers. This trend is predicted to be gaining further momentum, in this coming year.</p/.

The regulatory and taxation policies in the form of Real Estate (Regulation & Development) Act, 2016, and Goods & Services Tax (GST) are finally providing a stability to the property development environment and hence felicitating the business in a more standard procedure.

 

Investors are finding better risk-adjusted returns in this segment. As affordable housing is boosting the project cash flows in comparison to the conventional real estate, as most units under this segment are sold out long before they are constructed. 20 percent of the internal rate of returns (IRR) are being realised consistently across the market cycles.

 

Both developers and consumers are finding the affordable housing as an attractive proposition. Because the demand is huge and largely unmet, there are challenges for affordable housing projects in tier-1 cities, availability within established locations and the land costs are providing a difficult front.

 

P.M. Narendra Modi’s plan of building homes for all by 2022, is all set to boost the economy by $1.3 trillion. The financial year saw an additional incentive of 39% higher allocations, announced for affordable housing development, under the Pradhan Mantri Awas Yojana (PMAY). It has also extended the Credit Linked Subsidy Scheme (CLSS) to loans up to Rs 12 lakh. This will create 60 million new houses and over 2 million jobs annually.

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