Budget 2024: Real Estate industry expects boost to affordable housing

Mumbai, 25 January: The government’s flagship affordable housing programme scheme, Pradhan Mantri Awas Yojana - Urban (PMAY-U), had made a big promise when it was launched in June 2015. It assured a pucca house to all eligible urban households, including slum dwellers and economically weaker sections (EWS), by the year 2022. The deadline was later extended to the year 2025 after the pandemic stalled the progress of the scheme.

With just a year left now to achieve this massive target, the government may likely take big leaps to boost affordable housing in the Interim Budget, to be presented on February 1.

Speculations are high as the real estate sector hopes for tax incentive for the home buyers, especially in the affordable housing segment. The industry experts are expecting affirmative action as the government pushed the scheme last year as well. The Union Budget 2023 had increased allocation for PMAY by 66% to ₹79,000 crore, of which ₹25,103 crore had been allocated to PMAY-U.

According to a recent Reuters report, Finance Minister Nirmala Sitharaman may again raise allocation for low-cost housing by another 15% during the Interim Budget to ₹1 lakh crore for FY 2024-25.

Higher allocation for PMAY means that there would be more funds available for each of the four verticals of the scheme -- slum redevelopment, affordable housing in partnership, beneficiary-led individual house construction/enhancement and credit linked subsidy scheme (CLSS).

Let’s take a look at the incentives provided by the government currently under the PMAY scheme.

Incentives for affordable housing segment

The in-situ slum redevelopment vertical of the affordable housing scheme currently offers central assistance of ₹1 lakh per house for all houses built for eligible slum dwellers with participation of private developers using land as resource. Under the affordable housing in partnership (AHP) vertical, the state/UT governments, through their agencies or private partnerships, can plan housing projects for economically weaker sections, low-income and middle-income segments. The scheme offers central assistance of ₹1.5 lakh for every such house built.

Under the beneficiary-led individual house construction/ enhancement vertical, central assistance up to ₹1.5 lakh per EWS house is provided to eligible families. And finally, under the Credit-Linked Subsidy Scheme (CLSS), beneficiaries of the EWS, LIG and MIG segments can avail housing loans from banks and other financial institutions at subsidised interest rates. CLSS offers an interest-cost subsidy of anywhere between ₹1 lakh to ₹2.67 lakh to such households that get loans for the construction or enhancement of homes.

Expectations of homebuyers from Interim Budget 2024

Notably, an increase in the PMAY allocation may translate into higher limits under the interest subsidy scheme, increasing the affordability of such homes for buyers. Further, the interim Budget 2024 may also take the significant step of redefining affordable homes altogether.

Currently, affordable housing is classified as a dwelling unit with a price ceiling of ₹45 lakh and a carpet area of 60 square metres (645.8 sq. feet) or less. Considering the massive increase in land and construction cost over the years, the Confederation of Real Estate Developers' Associations of India (CREDAI) seeks a revision in this structure. This will help more homebuyers qualify for benefits offered through the affordable housing scheme.

According to CREDAI the definition of affordable housing should be revised as a unit with 90 square metre RERA carpet area in metro cities and 120 square metre RERA carpet area in non-metros without a cap on cost of the unit. With the country already facing a shortage of 3 crore-plus affordable housing units across rural and urban India, the industry insiders will keep a keen watch on whether the Centre pays heed to these demands during the upcoming budget or let one more promise fade away quietly.