Ever heard of the term, “Affordable Housing”? The first impression that you might get out of this is “cheap homes” but that’s not what it means.

Affordable housing is the latest trend in Indian real estate which is currently sweeping the property sector across the country. New affordable developer projects are coming up that target this sector and it’s being particularly catered towards the lower to middle-income groups.

Let’s understand what affordable housing really means and why it can turn out to be a great investment for you, whether you’re a property investor, buyer or seller.

What is Affordable Housing?

The affordability of something is determined by the spending capacity of something. A person who earns over 1 crore rupees in a year can easily afford a flat costing 5 crore and above. This makes the 5 crore flat ‘afforable’ for the person.

Similarly, if a person earns 1 lakh or less in a year, the biggest bid he can make while purchasing a home would be around 10 lakh rupees. In India, nearly 70% of the Indians earn less than 4 lakhs a year and a large proportion of them lives in rented accommodation.

Therefore, when we talk about ‘affordable housing’, we refer to the affordability of real estate properties for the bigger segment of the society who struggle to save enough to buy a house costing above 50 lakh rupees in India.

Unlike prevalent beliefs, affordable housing doesn’t mean poorly built homes with lack of amenities just to give the lower-income groups a roof on their heads. It’s a well-planned real estate sector that aims to provide smaller but well-built homes with all kinds of facilities inside a tight budget.

Affordable Housing Projects in 2018 (and expected trends for 2019)

The humungous policy reforms such as GST implementation and demonetization gave the realty sector a solid hit. It was hard to recover from an already shaky market condition and these two major blows made things worse for everyone.

Nonetheless, after almost 2 years after the economic massacre, the realty sector also received some great initiatives such as RERA and announcement of PMAY. The core focus of these policy initiatives is to make real estate dealing more transparent and easily available to the common man.

Affordable Housing came out as one of the opportunities for the real estate developers to bank on. The Government of India provided legal and capital help to builders investing in the affordable housing sector in the form of subsidies and an overall jump in affordable units was seen.

In Mumbai and Bangalore, that are considered to be the most expensive cities to settle at, we saw a rise significant rise in affordable residential properties. In 2018, Bangalore accounted for 40% of the affordable housing properties.

As we look forward to 2019, affordable housing would be a sector to look at in terms of making a real asset for yourself or for commercialized business opportunities.

Reasons to Invest (or Buy) Affordable Houses

If you’re planning to buy a home in 2019 and your budget revolves around the 50-60 lakh bracket, you should consider buying an affordable housing unit. We have laid down some important reasons for stating the same.

Easy to Own

Projects aimed at delivering affordable housing flats are all priced under the price of 1 crore. Typically, the prices revolve around 50 – 60 lakh at max and 15-20 lakhs at the least.

The houses range between 500 to 1200 sq feet in size and the architecture fits covers most of the typical household needs in this size. You get 1 to 2 BHK apartment with a kitchen and a washroom. A living area or a dining hall is also available depending upon the builder.

Such pricing is attractive to buyers for whom all of the above features weren’t available at this price point in the past. People who wish to move into their new homes by 2020 must look for such housing projects. The real deal will be available to those who make the purchases till the time the government is incentivizing this sector.  

Government Incentives

The Government has been kind in supporting the affordable housing market with an array of initiatives. The Housing for All by 2022 agenda and Pradhan Mantri Awaas Yojana are two examples of such initiatives that are aiding developers to make such projects a reality.

The steps are being taken in order to resolve the housing crisis in India. The property rates have encumbered the lower income groups to actually purchase a house of their own in their lifetime without facing serious depts. These new initiatives will take away a few of the burdens being faced by the low-income groups to make ‘own house’ available to them.

In the latest notification, the ministry has extended the deadline for availing subsidy on home loans up till March 2020. The previous deadline was March 31st, 2019.

In this scheme, the income groups resting between an annual income of 6 to 9 lakhs, will be eligible for a 4 percent interest subsidy on the home loan. The same subsidy of 3 percent will be available to the income groups cashing 12 to 18 lakhs per annum.  

Bank Loans Available

Just as mentioned above, home loan schemes are available to individuals who wish to purchase a new house falling under the affordable housing projects. The loans have lower interest rates than earlier and can be accessed with fewer restrictions to deal with.

The eligibility criteria for individuals has also been relaxed and the applications are moving forward faster than before. In a news item, it was reported that more than 3 lakh beneficiaries have already availed subsidized loans under PMAY from various authorized banks across the country.

Offer a Good Package Deal

If we count the number of perks available to the buyer, affordable houses are a full packaged deal. One remarkable feature of the scheme is that the developers are not making compromises on the construction quality or a number of features available inside a residential unit. Rather they’re looking to sell a large number of units to make the profit.

The amount of profit that can be made in a single unit lies in the hands of the real estate developer. They can sell it for double the price or make a reasonable profit on the flat.

When MHADA announced a list of about 100 flats being sold for less than the market rates, they received 1.6 lakh applicants for the same. Some people even bought flats costing around 5 crores because they were available for at least a crore less than the market price.

This comes as a great lesson to developers looking to sell more flats in less time. Offering competitive prices and a bundle of amenities is a good step forward for developers to win in the Affordable housing game.

Great for Investment

As the flats being developed under the affordable housing segment aren’t that costly, they can make up for plentiful real estate investment. If you’re planning to invest in real estate and can only spare 10 lakhs at max, you can actually think of buying a flat to be sold later.

This wasn’t possible earlier. Also, the demand for affordable housing in India is huge at the moment. A lot of people who currently don’t have access to housing will look forward to making purchases with the subsidized rates, and ongoing projects might also look for investment options.

Considerations While Buying an Affordable Housing Flat

If you’re going to buy or invest in the affordable housing segment, you must know a few things before doing so. Essentially, buying a house via this method is not different from other modes of property purchase but to make the best use of available benefits, know them is important.

Go for Ready-to-move-in Flats

Over the past three years, reportedly about a million affordable houses costing around 50 lakh rupees have been constructed across the country. A lot more are on the way and the demand is rising with the minute.

So, the best strategy, for now, would be to purchase a flat that is available for possession at the earliest. Some property experts argue that you should buy flats that are ready to move in so that the current stock of units can be cleared as quickly as possible.

Nonetheless, it’s advisable that your flat shouldn’t have a possession time later than January 2020. This would help you make the full use of the loan products that are being handed out on subsidized interest rates.  

Get a Good Location

It’s a point of concern that most of the affordable housing projects are being built far from the city’s residential hotspots. The obvious reason is the high value of land inside the city, where meeting the affordability promises would be harder.

In any case, don’t go for projects that are too far away from the city. Try to settle for a project with easy accessibility to your office and is in well within bounds of the city. Location is of primary importance while purchasing a house and it shouldn’t be compromised even if you’re getting a flat for cheap.

Choose Amenities Over Carpet Area

Most of the flats developed in the affordable housing regime have a maximum carpet area of 1200 sq feet. The flat has to pack two bedrooms, a kitchen and a washroom inside this much carpet area which is an architectural challenge to deal with.

The basic expectation of an affordable housing project isn’t a large dining hall or a big master bedroom. Hence, you should focus on the amenities that are available to you as a resident.

Look for things like parking facilities, availability of shared open spaces, a gated community and henceforth as per your preferences. The size of the flat is not going to make a monumental difference anyway.

Choose your loan product wisely

Choosing loan products while making the purchase is crucial in the longer run. Although there are subsidies available, it’s still important that you don’t overbudget yourself in the lieu of subsidy.

Consult a real estate agent who is currently associated with affordable housing projects in Mumbai, or your place of residence before taking the loan product.

Real estate agents are particularly knowledgeable about the loan products as they work closely with financers and home loan authorities. You’d be able to get good guidance on the best bank and the best scheme available for buying the house in proportion to your monthly salary.  

Consult a Realtor before making the purchase   

A realtor would not only come handy in settling your finances right, but they’d also help you in finding the best project to bet your money on, with other legal help.

If you’re living in a city like Mumbai which has tons of projects and construction going on, finding the best project can be a real hassle. In such scenarios, the services of a residential real estate agent for affordable housing can help save you money and mental peace.

Why India needs Affordable Real Estate to be integrated?

The Houses Increase Access to Real Estate  

The houses range between 500 to 1200 sq feet in size and the architecture fits covers most of the typical household needs in this size. You get 1 to 2 BHK apartment with a kitchen and a washroom. A living area or a dining hall is also available depending upon the builder.

Such pricing is attractive to buyers for whom all of the above features weren’t available at this price point in the past. People who wish to move into their new homes by 2020 must look for such housing projects. The real deal will be available to those who make the purchases till the time the government is incentivizing this sector.  

Eased Baking Services Make it Possible For the Common Man

Just as mentioned above, home loan schemes are available to individuals who wish to purchase a new house falling under the affordable housing projects. The loans have lower interest rates than earlier and can be accessed with fewer restrictions to deal with.

The eligibility criteria for individuals has also been relaxed and the applications are moving forward faster than before. In a news item, it was reported that more than 3 lakh beneficiaries have already availed subsidized loans under PMAY from various authorized banks across the country.

No Compromises are Made on The House Quality

If we count the number of perks available to the buyer, affordable houses are a full packaged deal. One remarkable feature of the scheme is that the developers are not making compromises on the construction quality or a number of features available inside a residential unit. Rather they’re looking to sell a large number of units to make the profit.

The amount of profit that can be made in a single unit lies in the hands of the real estate developer. They can sell it for double the price or make a reasonable profit on the flat.

Conclusion

Therefore, when we talk about ‘affordable housing’, we refer to the affordability of real estate properties for the bigger segment of the society who struggle to save enough to buy a house costing above 50 lakh rupees in India.

Unlike prevalent beliefs, affordable housing doesn’t mean poorly built homes with lack of amenities just to give the lower-income groups a roof on their heads. It’s a well-planned real estate sector that aims to provide smaller but well-built homes with all kinds of facilities inside a tight budget.  

Affordable housing is set to turn the tables for Indian real estate, signs of which are already visible in the current markets. We can expect more affordable housing projects to sprout in the future and India may finally achieve the goal of ‘housing for all’ by 2022.   

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