India Will Soon Get a New Affordable Housing Policy

Bangalore: To boost the real estate sector, India will soon get a new affordable housing policy. The Union Ministry of Housing and Urban Poverty Alleviation (Mhupa) are in process of finalizing the policy in coming two months, reports Dilasha Seth of Business Standard.

The government has already announced external commercial borrowing (ECB) for affordable housing in the union budget but the real estate industry showed less interest because of low margins in this category. Thereby, the government is trying to attract developers by implementing new affordable housing policy.

 According to Mhupa officials, "We realize that ECB will work only if affordable housing is attractive. Therefore, we are coming up with this policy as a package, along with ECB, in the segment on the lines of what the Rajasthan government has done,” reports Business Standard.

The upcoming policy will increase the floor space index (FSI) and also ease density norms. "The policy will have provision for interest subsidy and capital subsidy to builders," says the official.

According to the policy, government land will up for auction and the developers who promise to launch highest number of units for the economically weaker section (EWS) as well as for the low income group (LIG), the land will be given to them. As per the ministry norms affordable housing comes at 300 square feet for EWS and 500square feet for LIG and 600-1200 square feet for the middle income group (MIG).

For instance, Mahindra and Mahindra Lifespaces, which is Mahindra’s real estate arm, is planning to venture into this affordable housing section with homes priced between 7 lakh and 15 lakh in Maharashtra and Tamil Nadu. Adding to this, Tata Housing, the Usha Martin Group and Jerry Rao's Value and Budget Housing Corporation are also venturing into this affordable housing section. However, other developers prefer to maintain distance from this affordable housing section due to low margin.

Anurag Mathur, MD, Cushman & Wakefield India, stated that "It is a matter that needs very urgent attention and a unified action plan to address some of the fundamental issues plaguing this sector, such as availability of developed land and its cost, multiple and layered taxation on input materials as well as the finished product, multiplicity of approvals, etc."