In India, an affordable housing scheme was launched on June 1, 2015, by Prime Minister Mr Narendra Modi. The aim of the PMAY (Pradhan Mantri Awas Yojana) was to provide affordable housing to poor people. The affordable houses are built with eco-friendly construction methods in selected cities and towns to the benefit of the urban people. Adding to this Credit Linked Subsidy Scheme was introduced for PMAY beneficiaries as they are eligible to get interest subsidy if they take a loan to construct or buy a house in Hyderabad and other states.
Hence to promote affordable housing, many measures are taken by the Government to support it. Its initiative is to provide shelter to all poor people in India and the economic potential resulting from the mass construction of the home. This will result in additional employment, consumption of materials, etc. and this creates a chain of economic activity. Its main objective is to have affordable housing to all rural and urban people by 2022.
What is Affordable Housing?
A housing unit offered at low cost for the people whose income is below the average household income is affordable housing. The eligible people for affordable homes include low-income people, middle-income people and economically weaker sections ( Urban people) who have very low levels of income. Due to the high market price buying a home at an affordable rate is a key issue in many developing countries. Affordable housing in rural and urban areas need differently tailored policies as land is the main constraint in the urban areas.
Understanding the housing needs of the poor people, the Government has taken some measures from the last 15 years. In the beginning, the National Urban Housing and Habitat Policy (NUHHP) has set 2007 as a key focus to provide affordable housing for all. Later, it has pointed 2022 as the target year to achieve housing for all objective by making specific initiatives. The PMAY affordable housing is introduced in two segments include the PMAY (Urban) and PMAY (Rural) to reach a target of housing for all by 2022.
What is PMAY-U?
Pradhan Mantri Awas Yojana-Urban was introduced in 2015 with the aim to construct 20 million houses by March 31, 2022, for urban people. Under PMAY scheme, financial assistance is given to States or Union Territories (UTs) to support housing requirements. Beneficiaries belonging to Economically Weaker Sections (EWS), Lower Income Group (LIG) and Middle-Income Group (MIG) in urban areas can avail interest subsidy under the scheme. As per the statement of the Ministry of Housing and Urban Affairs, on January 2019, almost 69 lakh houses were approved, of them, 13.59 lakh houses were completed.
What is PMAY- G?
The PMAY Gramin was started in 2016 to construct affordable houses in rural areas and aimed to complete them by 2022. Under the PMAY scheme, nearly 1.25 crore houses were constructed in January 2019. As in the next month (February 2019), the Cabinet has redefined target for PMAY-G to 1.95 crore houses under PMAY-G Phase-II up to 2022. However, the construction of affordable housing under PMAY schemes are working excellently, and nearly 1.53 crore houses have been completed under the scheme as on end of January 2019.
What Measures are Taken by the Government to Support Affordable Housing?
- The Government has taken several measures that are helping poor people to build new houses. The supporting measures of Government were launched in the Union Budget 2017-18, and they are as follows.
- Allowed infrastructure status to affordable housing, as it helps developers of affordable housing to get funds from different ways include external commercial borrowings (ECB), foreign venture capital investors (FVCI) and foreign portfolio investors (FPIs).
- Increased the project construction completion period, the construction of affordable housing projects should complete within five years as earlier it was to be done within three years.
- One-year time is given to developers for paying tax on notional rental income on unsold completed units.
- Tenure for long-term capital gains is reduced to two years as earlier it was three years for affordable housing.
- Revised the qualifying criteria to the carpet area from the saleable area for affordable housing
- Refinancing facility was increased for affordable housing by National Housing Bank (NHB) for individual loans.
How Government Supported Developers in Affordable Housing Sector?
The government has introduced several measures for developers in the affordable housing segment are as follows.
- Several incentives such as subsidies, tax benefits and institutional funding were provided.
- Housing Fund (AHF) in National Housing Bank was formed by Government and is funded from priority sectors which are authorised by the government of India.
- Several supportive measures for the housing sector was made in budget 2019 such as exemption on payment of income tax on notional rent for second own house and increased Rs 2,40,000 for TDS threshold on rent.
Minimized GST Rates for Affordable Housing
- The GST Council has decreased tax rates for affordable housing to 1% as earlier it was 8 %
- Ceiling value of affordable houses below Rs 45 lakhs will be exchanged with a 1% GST rate.
- Limit of carpet area for Affordable houses is set as 90 sq.mts. in non-metropolitan cities and 60 sq.mts. in metropolitan cities with a ceiling value of Rs 45 lakhs in both cases.
RBI efforts in Affordable Housing
- The price of affordable residential property should be less than Rs 65 lakhs in metropolitan cities and Rs 50 lakhs in non-metropolitan cities.
- The central banks give loans to people who are building a house and buying flats.
- The RBI also provides loans to affordable housing under priority sector lending.
- To finance loans for affordable housing, RBI allowed banks to issue long term bonds with a minimum seven years maturity.
The PMAY scheme aims to provide proper houses to all homeless and mitigate the housing gap in India. With infrastructure developments and financial assistance, the government has supported affordable housing scheme. Hence, the Government is providing all the support to promote affordable housing in India.
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By: Shailaja K