Affordable housing: How Modi government’s initiatives like Credit Linked Subsidy Scheme, RERA will help 1st time home buyers
The world is taking note of how India’s real estate sector is globalising on par with the developed countries. With the bestowal of infrastructure status, the sector has not only become an attractive investment opportunity but is also spearheading India’s dynamic growth with greater FDI inflows. The real estate sector is projected to drive economic growth doubling its GDP contribution from 9% in 2016 to almost 13% by 2025.
Reforms to spur growth Within the real estate sector, the housing sector alone contributes 5-6% to India’s GDP. Over the past two years India’s housing industry has received a boost from the augmented growth in the affordable housing segment, which has been driven by the government’s vision of ‘Housing for All by 2022’. This has also been led by industry-building initiatives like the Credit Linked Subsidy Scheme (CLSS) and Rera, thereby creating improved transparency and consumer trust. These initiatives have spurred credit off-take in the affordable segment for first-time home buyers. Subsequently, there has already been a significant surge in affordable housing projects across eight major locations and tier 2 and 3 towns. Homes priced below `50 lakh accounted for about 71% of total launches between January to June 2017, a significant 52% increase from the corresponding period in 2016. Simultaneously, strong demand continues to provide more impetus to this segment, driven by key changes in the consideration of carpet area instead of built-up area, several tranches of interest rate subventions and better availability of affordable housing finance solutions across India. Affordable housing has taken off in a significant way, touching the lives of millions of Indians to transform the dream of home ownership into reality. Driven by this improved positive real estate outlook, India’s rank in the Global House Price Index has jumped from 13th to the 9th position among 55 international markets, making the Indian real estate industry the most globally recognized sector.
Multiplier effects India needs growth, physical infrastructure and jobs—all of which can be delivered by the real estate industry which has strong multiplier effects on other complementing industries, thus strengthening employment opportunities. Real estate is the second largest employer in India after agriculture. About 10% of India’s workforce is directly or indirectly created by the construction industry and number of jobs added is expected to reach 172 lakh by 2025, from 92 lakh in 2016. Affordable housing has clearly been the government’s central agenda and the growth within the industry reflects huge additional need for manpower and talent. Affordable housing remains a compelling story for India with rapid urbanisation, growing aspirations and the emergence of India’s new growth engines in tier 2/3 towns and cities with fast growing economic potential. Affordable housing to lead growth Affordable housing is at the core of India’s real estate movement and this story is set to unfold for multiple years. Led by these dynamic developments, housing finance companies have also been significantly contributing to the industry’s growth. They have been addressing financial needs of the segment at the base of the pyramid and over time have gained a significant market share in India’s mortgage market which has also been growing rapidly. It is set to continue revolutionising India’s real estate sector as it propels companies towards higher value creation through wider financial literacy, customer centricity, operational efficiencies, and better risk management. To achieve a national housing ambition of this scale, the entire housing ecosystem must be well-developed with all stakeholders sharing a unified vision and working collaboratively to accelerate the affordable housing opportunity. Concerted efforts will transform the vision of ‘Housing for All by 2022’, into a reality with smarter cities, wider financial inclusion and a well-connected digital India.