Affordable Housing – The Next Wave in India

Apna Ghar (own home) is always a dream for every Indian. There are ample numbers of real estate projects coming back to back to fulfill the surging demand of home buyers.

There are multiple options available in the market with different categories such as premium, luxurious houses; economy homes with all the essential amenities such as location in the proximity of schools, in-house amenities (clubhouse, swimming pool, playground, gymnasium etc.).

Affordable Housing - The Next Wave in India

Ways to Fulfill the Dream of Affordable Housing:

Home Loans:

A middle-class family who is the biggest chunk of the buyer, always prefer to avail a Home Loan so that the amount can be paid in the form of EMI (Equated Monthly Installments).

There is a number of banks and financial institutions that are ready to provide Home Loans of up to Rs.3.5 crore. Buyers just need to inquire about the process, documentation, Home Loan rates and finalize their tenor of the loan. The EMI can be easily calculated with the help of a Home Loan EMI calculator based on the rate of interest and tenor.Lower Interest Rate than Past:

Earlier, there was too much of reluctance among the buyers to opt for housing due to skyrocketing interest rates. Now due to high demand and intense competition, banks and other financial institutions are providing Home Loans at lower interest rates. The rate of interest rate which was earlier 14-15% has now come down up to 8.2 – 8.3%. This seems an affordable and consumable option

Government Initiative:

Pradhan Mantri Awas Yojana PMAY (Urban) – “Housing for all” mission for urban areas is being implemented by Government of India, Ministry of Housing & Urban poverty alleviation, with effect from 2015 till 2022.

Given the projected growth of urbanization in India and the consequent housing demands, Government of India has launched a new Credit Link Subsidy Scheme (CLSS) for Middle Income Group (MIG), for acquisition/construction of the house (including re-purchase) to cater to the MIG.

The salient features of the PMAY (Pradhan Mantri Awas Yojana) scheme are as under:

Name of the Scheme PMAY-CLSS for MIG
Particulars Middle Income Group 1 Middle Income Group 2
Household income Rs. Per annum Rs.6 lakhs- 12 lakhs Rs.12 lakhs – 18 lakhs
Dwelling Unit Carpet Area (Maximum) 160 sq. mt. 200 sq. mt.
Eligible Housing Loan Amt. for interest subsidy (Rs.) Rs.9 Lakhs Rs.12 Lakhs
Maximum Loan Tenure ( in years) 20 20
Interest subsidy (% p.a.) 4.00% 3.00%
Discount rate for Net Present Value (NPV) calculation of interest subsidy (%) 9.00% 9.00%
Maximum Interest Subsidy amount Rs. 2.35 Lakhs Rs. 2.30 Lakhs

 Public-private Partnership (PPP) Policy

Taking its efforts to achieve ‘Housing for All by 2022’ further, the central government has announced a new public-private partnership (PPP) policy for affordable housing. It permits central support of up to Rs.2.50 lakh per each home to be erected by private builders even on private plots.

Under this policy announced by Minister of Housing & Urban, eight PPP (Public Private Partnership) models have been provided for the private sector to invest in affordable housing segment.

It has also opened the potential for private investments in affordable housing projects on government lands in urban areas

The two PPP copies for private savings in reasonable housing on private lands include spreading central assistance of about Rs 2.5 lakh per each house as interest subsidy on bank loans as straight payment under the Credit-Linked Subsidy Component (CLSS) constituent of Pradhan Mantri Awas Yojana (Urban).

Under the second option, the central assistance of Rs 1.5 lakh per each house to be constructed on private plots would be offered if the recipients do not avail bank loans.

The Benefits in Taxation:

Housing loan undoubtedly saves your tax and help you in maintaining your investments.

  • Interest paid on loan is eligible for deduction up to Rs.2 lakh under Section 24 when the property is self-occupied.
  • The principal amount repayment of up to 1.5 lakh is eligible for deduction under Section 80C.

The Bottom Line 

Now that you are aware of the affordable ways to fulfil your dream of moving into your own home, you can pick an option as per your needs and affordability. All the best!

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