How 'affordable' is affordable housing?

In the last decade, there has clearly been a shift on the part of the real estate builders and developers towards the soaring middle class population. Increasing bank loans have aided the situation. To help change the scenario, in the Union Budget 2016, we all know that the government announced a 100 percent deduction for profits to housing projects building homes upto 30 sq mts in the four metros and 60 sq mts in other cities. The sentiments have been upbeat since its announcement a few days ago.

The Finance Minister also said that the construction of affordable houses upto 60 sq mts under any scheme of the central or state government including PPP schemes would be exempted from service tax. First-time buyers will get a deduction of Rs 50,000 per annum, for loans upto Rs 35 lakh sanctioned in 2016-17, where the house cost does not exceed Rs 50 lakh. Over the last few years, though the government has been speaking about various initiatives to build affordable houses, there have not been too many affordable houses. Affordable housing can be defined using three key parameters such as income level; size of the dwelling unit and affordability, according to a recent report by KPMG. In that case, how sustainable is the government's plan?

What seems like a policy to help the low-income group households could definitely bode well in the future, provided it is implemented properly, according to experts. Samantak Das, chief economist at Knight Frank India, says, "This move would help the construction companies and builders, who in turn, could bring down prices to benefit the consumers. There would be more constructions in tier-II cities."

With this policy, a lot of social-rent houses, which are typically houses rented out by local authorities or rich landlords at half the market rent would be replaced more by affordable houses.

"It's a win-win situation for both the parties developers and consumers. The bridge between higher demand and lower supply will soon get built," says Shubhranshu Pani, managing director infrastructure services at Jones Lang La Salle India.

It is clear though that boosting the supply of affordable homes to buy might lead to a messy distributional scene. There could soon be a situation where in the middle-class pools in money to buy, say, two adjacent small apartments, at a lower price. "There has to be a clearer agenda to provide houses to the low-income group at a lower value, which might be grabbed very easily by the middle class," concludes Pranay Vakil, chairman of Praron Consultancy. The government is making a persuasive blueprint for this multipronged strategy for building a more affordable India through greater engagement and intensity. This move is bringing a sigh of relief among a lot of people, for whom living itself is a burden.

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