Affordable housing has been an issue in India for a long time now. Factors such as rapid urbanization and increased migration of population from rural areas to cities have caused a severe shortage of space. This, in turn, has resulted in skyrocketing property prices, especially in metro cities. As a result, buying a house of your own has become a distant dream for many. This is especially true for people belonging to the economically weaker section of the society. Moreover, as more and more people are moving out of their villages for better prospects, the already crowded metro cities are becoming even more congested. As a result, the number of slum settlements is also rising rapidly. This, in turn, is creating further problems such as water and electricity shortage, sanitation issues and land encroachment. The Government, too, has realized the severity of this issue and is fast implementing several provisions to curb this problem. In fact, affordable housing was a major concern highlighted in the Union Budget 2019.
After recognizing the demand and supply gap for affordable housing for the economically weaker population in the country, The Finance Minister of India, Nirmala Sitharaman proposed several provisions and schemes in the Budget 2019. A major highlight of the Budget 2019 speech was the Pradhan Mantri Awas Yojana, a government scheme that aims to provide home loan subsidy for people struggling with affordable housing in the country.
The Pradhan Mantri Awas Yojana, commonly referred to as the PMAY scheme, aims to provide over 20 million affordable houses in India by the year 2022. To achieve this audacious target, the government is planning to give a subsidy to all the eligible beneficiaries that fall under the PMAY CLSS (Credit Linked Subsidy Scheme).
The three major income groups that have been identified to be eligible for the PMAY subsidy are:
Economically Weaker Section (EWS)
Lower Income Group (LIG)
Apart from the above-mentioned income groups, the PMAY scheme is also expected to benefit individuals belonging to scheduled castes, scheduled tribes, women applicants, physically disabled, senior citizens and transgenders. Under the PMAY CLSS, these different demographics can avail a benefit of 6.5% interest subsidy on housing loan for a period of 20 years.
To ensure that the benefits of the interest subsidy can be enjoyed by all, the funds allocated have been divided into two PMAY components- PMAY-Urban and PMAY-Rural. The response for both these components has been positive so far. The government has already constructed over 1.53 crore houses under the PMAY program in over 2508 towns and cities in India. Under the PMAY rural, the government also plans to improve basic amenities such as water supply, electricity, LPG cylinders, etc. in these regions. On the other hand, the main aim of PMAY-Urban is to eliminate the rising number of slum dwellings in the cities. Moreover, the houses under both these components would be built in keeping the environmental sensitivity in mind. All the construction material that would be used would be eco-friendly. Also, special concessions would be given to senior citizens or differently-abled PMAY beneficiaries, by allocating ground floors to them.
Tax holiday to affordable housing developers: The budget 2019 proposed to provide a tax holiday of up to 1 year to developers who would be aiding the government in making ‘affordable houses for all by 2022’ a reality. Moreover, the government is also increasing builder contribution by presenting several subsidies, tax benefits, and separate institutional funding.
The government also plans to exempt tax on notional rent on the second, self-occupied house. Moreover, the threshold for TDS on rent is also increased to INR.2.4 lakhs.
Reduction in GST rates: Under affordable housing initiative, the GST rates have been reduced from 8% to 1%. The ceiling value on the house has also been increased to INR. 45 lakhs, with the GST implications still being only 1% on them.
Revision in the carpet area size: For houses with a ceiling value under 45 lakhs, the government has proposed to increase the carpet area from 30 sq.m to 60 sq.m for metro cities and from 60 sq.m to 90 sq.m in non-metro cities under the affordable housing initiative.
RBI Efforts: In order to enhance the affordable housing initiative, the RBI has declared the limit on the cost of the affordable residential property to be INR. 65 lakhs and INR. 50 lakhs for metro and non-metro cities respectively. The RBI has also agreed to issue term bonds to other banks to finance more loans for affordable housing.
Infrastructure status to affordable housing: The government has granted ‘Infrastructure Status’ to affordable housing. This makes it easy for developers to avail funds from foreign venture capitalists, foreign portfolio investors and other external commercial borrowing channels.
Other measures: The time limit for project completion has been extended to 5 years from the normal three years time. Moreover, the tenure for long-term capital gains from affordable housing has been reduced from three years to two years.
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You can also read about the eligibility of PMAY.
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