Housing Investment- For thousands of years, our evolution & subsequent battle for survival has ingrained within the human species. A desire to have a safe space where one isn’t physically attacked. The first human homes were, unsurprisingly, caves & shelters provided by the nearby environment. Then later, at some point, we devised ways to use animal skins to make tents, thus having portable, albeit temporary, homes.
The modern four-walled “houses” first started appearing at the onset of the Agricultural Revolution, about 10,000 years ago. The accidental discovery of farming brought a new lifestyle for the hunter-gatherer humans, who now needed to be more “settled” to grow & maintain their farms. These were more permanent settlements that provided quick access to farmland and safety from the various threatening predators around then. After approximately 10,000 years of building houses, the idea of having one’s own home has become very deep-rooted in communities & cultures across the globe.
In India, the desire and obsession with having your own house are equally strong. In fact, in my family, owning a home is one of their key goals in life. While many urban millennials might not feel this as strongly, I’m confident that even they would’ve been strongly advised to do so by at least one of their elders. But despite the views of some urban millennials, the vast majority of Indians still have an innate desire & ambition to own a house.
The biggest roadblock for the vast majority to achieving this is affordability. Houses don’t come for free in our modern society. Pretty much nothing does. Leave aside houses! It makes the dream of owning a home challenging and almost impossible for most who belong to the lower-income segment. To help realise this aspiration of those genuinely unable to afford it, the Government launched the Pradhan Mantri Awas Yojana (PMAY) in 2015.
Government support for Affordable Housing
The PMAY started with an objective of building two crore (20 million) affordable houses over seven years for the lower-income segment. Under this scheme, all existing and future housing units are called “affordable housing“.
Since its inception in 2015, the PMAY has continued to remain a policy focus for the Government – each subsequent Budget has emphasised it and increased the funding earmarked for this project. Let’s take a quick look at the key developments the Government has initiated under PMAY to boost the affordable housing projects for Housing Investment.
After launching with an initial corpus of ₹1,231 crores, the allocation to PMAY was increased by more than 300%. Granting ‘infrastructure status’ to affordable housing projects – ensured the lower cost of borrowing for developers, thus encouraging them to take on such projects and Housing Investment done . When GST was implemented in 2017, there were fears that this would impact the construction & sale of various affordable housing projects.
But the Government addressed those concerns in Budget 2018-19 when it reduced the GST rates to 1% for housing projects under the PMAYTo further incentivise developers. The Govt. tweaked the income-tax laws such that developers involved with PMAY projects can also claim a 100% deduction on profits from affordable housing projects, provided they are completed within five years (this has been extended from an earlier three years).
In her first Budget, FM Nirmala Sitharam announced an additional deduction of up to ₹1,50,000 on interest paid on home loans borrowed for purchasing an affordable house valued up to ₹45 lakh must appear recently in Budget 2020-21. The allocation to PMAY was again increased, this time by 8% to ₹27,500 croresAn Affordable Investment Opportunity.
According to the Government, 32 lakh houses in urban areas & 47 lakh houses in rural areas have been built & handed over as of Feb 2020. Hardeep Singh Puri, Union Minister for Housing & Urban Affairs, recently said in the Rajya Sabha that the Government would sanction the remaining approx. 1.12 crore houses under the Pradhan Mantri Awas Yojana (PMAY) by March 2020. These units are expected to be constructed & handed in over the next three years.
The houses sanctioned under PMAY have already seen an investment of approx. ₹5.70 lakh crore, with central assistance of ₹1.6 lakh crore. Out of that, nearly ₹60,000 crores of the main contribution has already been released as of December 2019.