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The Government has accorded infrastructure status to affordable housing segment thereby giving it easy access to institutional credit.
Housing stocks were up on Union Finance Minister's announcement.
Ashiana Housing surged by 10.34 per cent, and Gruh Finance gained by 1 per cent.
The announcement opens up new avenues for afffordable housing developer companies making it easy and comfortable finance from lending agencies.
Industry watchers have hailed the announcement.
“Granting infrastructure status to affordable housing will provide a boost in volume of construction activity across the country. A good boost to the construction industry that was struggling with reduced number of product launches in real estate in the last couple of years,” Joe Verghese, MD, Colliers International India , said.
Neeraj Bansal, Partner and Head of Real Estate, KPMG , said, “By granting infrastructure status to affordable housing, the Government acknowledges that affordable housing industry is an important driver of the economy. Affordable housing developers will now be eligible for several government incentives, subsidies, tax benefits and most importantly institutional funding.The status could also mean that the Government may release land specifically for affordable housing development in central locations of major urban centres in India.”
Nidhi Seksaria, Advisory Partner & Leader – Real Estate, BDO India LLP , said infrastructure status to the affordable housing segment will mean lower borrowing costs for the sector and thus addresses the margin issues that private players in this segment face. Combined with interest subventions, this could be a big step in making housing more affordable.
Rashmi Deshpande, Associate Partner on Real Estate, Kahitan and Co said, “The criteria for low cost / affordable housing has been changed from built-up area of 30/60 sq mtrs to a carpet area of 30/60 sq mtrs, thus making the low-cost – affordable housing segment more lucrative for the builders and also making the segment more attractive for the buyers. With the change in criteria from built-up area to carpet area, the purchasers get more spacious homes and the builder is able to market the property to a larger segment of buyers.
Additionally, the tax break of one year post receipt of the completion certificate, for the unsold stock, gives a slight breather to the builders.
The government has reduced the income tax rate for basic slab. It will help broaden the tax net and also increase the disposable income in the hands of tax payers coming within the category. This, coupled with the incentives on low cost housing and reduction in interest rates by banks, is likely to promote thrust in the affordable housing segment.
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