Dear Friends,

Greetings from Creative Valuers and Engineers!

Thank you for your overwhelming response to all our earlier newsletter issues. We seek constant feedback as it will go a long way in allowing us to continuously upgrade the content of our newsletter and provide information that adds more value to all our readers.

In this edition of our newsletter we would throw some light on the subject – AFFORDABLE HOUSING and its related topics.

Mumbai has always been the eye candy for both, the developers and the buyers. As per a recent study, Mumbai is about to witness a total demand of 2.31 lakh housing units by the end of 2018. To be precise this demand would majorly be generated from the mid income group. So the current need of an hour is affordable housing.

We have done a detailed research just to place valid points in front of our readers and boost their understanding on this topic. We hope you gain some valuable insights from this issue of our newsletter. Feel free to share your suggestions, queries, feedback by writing back to us.

HappyReading!!!

What is Affordable Housing?

Affordable Housing means to address the housing needs of the lower or middle income group. It becomes a key issue especially in developing nations like India where a majority of the population isn't able to buy houses at the market price.

In 2012, the Housing and Urban Poverty Alleviation Ministry made an upward revision on the criteria that define EWS. With this revision, families with an annual household income of up to Rs 1 lakh now come under the classification of Economically Weaker Section (EWS). The category of Lower Income Group or LIG also saw an upward revision - now, families with an annual income of between Rs. 1-2 lakh came under the LIG category. Previously, the definition applied to families earning Rs 5001-10000/month or Rs 60000-120000 annually.

Demand for Affordable Housing in India

India Ratings and Research (Ind-Ra) recent reports says, demand for affordable housing will increase to 25 million homes in the next five years, opening up a market opportunity valued at Rs 6 lakh crore for housing finance companies (HFCs).

With an estimated slum population of about 65 million and another 0.9 million homeless people in urban India, the Housing for All / Pradhan Mantri Awas Yojana (PMAY-HFA), which aims to provide a home to all urban poor by 2022, is an important urban policy thrust.

The affordable housing segment is clearly on an uptrend. Growth in supply has been estimated to be 15 per cent in terms of launches in the last three months, as compared with the previous quarter.

Impact of affordable housing on households

From a national perspective, AH is one of the indicators of balanced growth in the country. When housing becomes unaffordable, there is either a bubble in the housing market with serious repercussions to economic policy, or other imbalances in the economy.

AH also contributes to significant economic impacts, including increases in local purchasing power, job creation and new tax

revenues. Affordable housing has been shown to have a neutral or positive effect on surrounding property values.

So, the trend of a cost-effective housing scheme is catching up fast as a positive impact of the affordable housing scheme also marks an increased cash flow in this region of the real estate. This is proving equal opportunities to both the buyer and the developer, thus pushing the identity of the real estate sector.

Affordable housing hotspots

In Mumbai, there are some housing hotspots where you can find houses with 60 square meter areas as the maximum limit.

Asangaon:
Being an important part of Thane district and located at a distance of 70 km from the heart of Mumbai. Here, you can find some exclusive 1 BHK and 2 BHK apartments in the affordable housing category. A 1 BHK unit will cost you between Rs 10-15 lakh.

Panvel:
One of the important areas of Navi Mumbai, Panvel surely offers some light for those looking for affordable homes in this region. One can easily have 1BHK units ranging from 350-600 sq ft, within Rs 20-35 lakh here in Panvel.

Ulwe:
Another promising location, 1BHK units are available ranging from Rs 24-30 lakh with mentioned sq feet areas.

Virar:
The prices of homes in Virar have significantly dropped by 11.5 per cent in the past three years. A 1BHK home is available for Rs 27.97 lakh,

Factors to be considered for affordable property

Factors other than areas that contribute towards the affordability of a property are:

Connectivity:
Connectivity is an important aspect to be considered while accessing the affordability of a residential property in a specific locality in Mumbai.

Amenities:
Localities that do not offer such civic amenities within a reasonable distance cannot be categorised as truly affordable, even if the property prices are extremely low.

Safety Level:
Finally, finding an affordable house should not be given priority over security. Verifying, the safety aspect while choosing the localities that offer affordable housing is extremely critical.

Pradhan Mantri Awas Yojana

PMAY is a mission started with an aim ‘Housing forAll’ (HFA) scheme by NDA Government to be achieved by the year 2022.

The government has set an ambitious target to construct as many as 12 lakh houses under the PMAY-U in 2017-18. In 2016-17, only 1.49 lakh houses were built under the scheme, against a target of 32.6 lakh units. It plans to construct 26 lakh houses in 2018-19, 26 lakh in 2019-20, 30 lakh in 2020-21 and 29.8 lakh in 2021-22.

The government has increased the carpet area of houses eligible for interest subsidy under the Pradhan Mantri Awas Yojana-Urban. Besides helping in clearing unsold stock, this move will also encourage developers to launch new projects and boost economy, GDP growth and employment.The eligibility criteria and interest subsidies for the two MIG categories remains unchanged.

The hike in carpet area has been presented in tabular form as below:

Loan Amount/Margin

Maximum Loan Limit as per guidelines is as follows:

Tax Exemptions

Initiatives have been taken to bring down the costs involved in construction sector to some extent by announcing a 100% excise duty exemption for Ready Mix Concrete.

The GST Council had extended the concessional rate of 12 per cent GST for construction of houses under the Credit Linked Subsidy Scheme (CLSS) to promote affordable housing. The effective GST rate, however, comes down to 8 per cent after deducting one third of the amount charged for the house, flat,towards land cost.

All inputs used in and capital goods deployed for construction of flats, houses, etc attract GST of 18 % or 28 %. As against this, most of the housing projects in the affordable segment in the country would now attract GST of 8 %.

Stamp Duty Relaxation

While most of the property owners today pay 5% as stamp duty for their registered properties, the Maharashtra government now plans to bring down the stamp duty ratesfor individuals belonging to the EWS (Economically Weaker Section).

The state's Stamp Duty and Registration department has started collecting only Rs 1,000 as stamp duty fee, instead of the usual five per cent on homes that measure approximately 30 sq metre (i.e. 320 sq feet) and 60 sq m (i.e. 646 sq ft). However, the income of the person buying a home upto 320 sq ft should not exceed Rs 3 lakh, while the income of aperson buying a flat upto 646 sq ft should be between Rs 3 lakh and Rs 6 lakh.

Lastly, the home that is being registered with the government should be the first house and to avail the discount of all the criteria of the Pradhan Mantri AwasYojna (PMAY).

Eligibility Criteria

Following category of people are eligible to apply for affordable housing under PMAY:

• EWS (Economically Weaker Section):
  People who earn an annual income less than Rs. 3 lakhs come under this category.


• LIG (Low Income Group):
  LIG members are those who have a yearly income between Rs.3 lakh to 6 lakh.


• MIG 1 (Medium Income Group):
  People who earn an annual household income of less than Rs.12 lakh come under the MIG1 category.


• MIG 2 (Medium Income Group):
  People that earn a yearly income between Rs.12 to Rs.18 lakh will fall under MIG2 of the PMAY scheme.


• Minorities
  Individuals from minority groups like SC/ST/OBC will fall under minorities.

Impact of demonetization on affordable housing

With the RERA Act and demonetization step, surely positive reforms will be seen and the growth in affordable housing

sector will be bliss for both the developers and the home buyers. Affordability is a big factor for homebuyers these days in the realty business.

There will be an increase in demand for bank’s working capital and this step is taken by the government to focus on affordable housing for the people.

Post demonetization, the real-estate market is buzzing with speculations. There are divided viewpoints with respect to the impact of demonetization on the realty market.

Conclusion:

We expect that private developers’ participation in affordable housing will increase, owing to lower financing cost and income-tax exemptions for developers.

Considering both, the demand and supply factors, we expect affordable housing to be the next major growth area in the residential sector, in coming years.

It is likely to grow much faster, as compared to office and premium residential classes in 2018, in a year where the property market will find support from improved industrial production and increased infrastructure spending.

Owning a house is the dream of every average family in India. For better opportunities, lakhs of people move to big cities. However, the charm of a big city is short lived as the expenses mount and living becomes a challenge.

Simultaneously, the influx of a huge population to these cities is creating havoc on the infrastructure. Fortunately, affordable housing projects will unleash relief on so many levels.

Contact Details:

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The information in this news-letter is prepared/presented by Creative Valuers& Engineers. The information herein is believed to be reliable and have been obtained from public sources believes to be reliable by Creative Valuers& Engineers. Creative Valuers& Engineers makes no representation as to the accuracy or completeness of such information.