Indian Real Estate is in a dire need of a resurgent reform.
The buyers have been highly unable to keep up with the rising prices and builders have spent too much into expensive properties. Overall, the conditions are unfavourable for both the parties. Buyers need better-priced houses whereas real estate developers need to shift focus to the lower income groups.
The above-mentioned issues were addressed by Government of India’s with strategies like Pradhan Mantri Awaas Yojana (PMAY) and Housing for All by 2022. These schemes aim to boost housing for the lower tier income groups (between 3-6 L/A and 6-18 L/A).
We call this boosted segment as the Affordable Housing Segment, which is rapidly taking shape in all major cities of India. Even the Union Budget 2017-18 looked to fund this segment and make reforms to improve economics in this area.
Government Initiatives In the Affordable Housing Segment
Affordable Housing Segment (AHS) was granted the official real estate status of “infrastructure” which aims to aid builders in securing funds for development.
Developer projects under AHS will be given a 5 year time frame for project completion.
Tax benefits were given to builders by altering the property holding time to 2 years from previously mandatory limit of 3 years.
Banks received provisions for handing out home loans at cheaper rates to customers, making it easier to get money for buying the house.
The credit limit was raised to 30 L with the bank catering to the 90% of the house’s amount.
How it Affects the Home Buyers?
Homebuyers have a lot to gain from these schemes if they follow the rules correctly. As a measure to determine an affordable home, you can use the EMI/MI Ration.
Which is nothing but,
Equated Monthly Installment of the loan / Monthly Income
If this ratio is below 30, the house you’re looking to get loan for can be considered affordable.
Some important rules to keep in Mind
Try to look for houses that don’t require you to get a loan above 30 lakhs. Banks will easily process your below-30 lakh loan with attractive rates of interests.
You can shift your home loan to a new bank if your loan is below the 30 lakh limit. This allows you to pay lower interest as compared to previous bank which is charging you higher interest.
Remember the 30 percent ratio and make the buying decision accordingly. The loan amount you take must not attract an EMI amount greater than 30% of your monthly income.
Try to invest in a small house that is built with quality materials. The agenda is not to fund the cheap housing segment but competitively priced housing.
Try to find a home that’s away from highly urbanised areas where property rates are usually touching the sky. The 100 Smart Cities project aims to bring futuristic amenities to a list of 100 cities in India. Try to choose a city from this list in order to make future gains with your investment.