CRISIL SME TRACKER: Housing gets a policy push, but challenges remain
Recent policy measures, in step with the government’s mission of Housing for All by 2022, augur well for developers and end-users alike.
Developers stand to benefit from grant of infrastructure status to affordable housing, which will promote priority lending, resulting in easier availability and lower cost of finance for them. The amendment of section 80-IBA, relaxing the condition of completion timeline of a project for tax deduction to five years from three years will encourage them to venture into large projects. The shift in eligibility criteria from “built-up area" to “carpet area" will increase unit size by about 25 per cent, helping home buyers in urban areas own larger units and allowing developers more elbow room to develop affordable projects.
Beneficial measures for end-users include refinancing of Rs 200 billion of individual housing loans by NHB in 2017-18, extension of interest subvention scheme, increase in the quantum and duration of loans under the Credit Linked Subsidy Scheme of Pradhan Mantri Awas Yojna (PMAY) and allocation of an additional Rs 80 billion under PMAY-Gramin.
However, challenges remain. For developers, availability of affordable land and delay in approvals are big issues, making single-window clearance and an online system for plan approvals an imperative. For customers from economically weaker sections, who are typically involved in small, informal businesses, the lenders’ requirement of IT returns poses a challenge.
Says Manish Jaiswal, Business Head - Real Estate Ratings, CRISIL: “Construction of over 3.75 million units per year is required to eliminate urban housing shortage by 2022 and the sops announced in the budget for affordable housing are likely to align loan EMIs with rental values, encouraging customers to use the ownership model. Infrastructure status and change in eligibility criteria from built-up to carpet area will have the maximum impact. It remains to be seen what policies the government introduces for improving ease of doing business, making land acquisition cost-effective and lending to economically weaker sections."