Say move will lure fence-sitting buyers, can now cater to sizeable portion of middle class housing category
The Union Cabinet’s decision to increase the carpet area of houses eligible for interest subsidy under Pradhan Mantri Awas Yojana (Urban) would push up sales in urban areas and boost the struggling real estate sector, experts said.
Since January 1, 2017, the Ministry of Housing and Urban Affairs is implementing the credit linked subsidy scheme for middle income group (CLSS for MIG) under the PMAY (Urban) for poor people availing housing loans, and a new interest subsidy scheme for housing loans for the MIG.
This will enable MIG home buyers to avail 4% interest subsidy on home loans taken from banks for apartments that are over 60 square metre to 120 square metre in carpet area and 3% interest subsidy on houses more than 120 sq metre to 150 sq metre carpet area under the MIG I and II categories of PMAY-U.
Realtors and industry bodies welcomed the decision, saying it will help in selling their unsold inventory and improving cash flows. For the last few years, the real estate industry has been under financial stress due to slowdown in economy, demonetization, goods and services tax and Real Estate (Regulation and Development) Act.
Commenting on the decision, Anshuman Magazine, chairman (India & South East Asia) at CBRE, a real estate and investment firm, said, “Such a move is set to attract more buyers as they will benefit immensely by getting bigger homes at accessible rates. To achieve the vision of ‘Housing for All’, such schemes and benefits opens up the market for buyers and further strengthen the spirit of the sector.”
Fence-sitting buyers who were delaying a home purchase will now consider buying a home, experts said.
A recent Crisil Research’s report had noted that demand for residential property is unlikely to revive in the next 12-18 months due to lack of end-user buyers. Moreover, absorption of new homes has been on a slide for over six years now.
“Our analysis shows home sales in the top 10 cities – Ahmedabad, Bengaluru, Chandigarh, Chennai, Hyderabad, Kochi, Kolkata, Mumbai Metropolitan Region, National Capital Region and Pune – have declined at a compound annual growth rate of 8% since 2011. The trend appears set to last well into fiscal 2019 or beyond, portending more pain for developers,” the report had said.