Affordable Housing: Policy Measures

Affordable housing is one of the objectives of authorities’ policy measures taken from time to time. The phrase 'affordable housing' connotes homes that are affordable for the section of the society whose income is below the median household income. Affordable housing implies differently across countries. This is because of the policy and polity scheme in the country. Affordable housing in India refers to the scheme aimed to close benefit the lower middle income groups. In an emerging country like India, affordable housing plays a significant role. In such countries, people cannot afford to buy homes at prevailing market price.

Role of affordable housing

According to Census 2011, 31.2 % of the population lived in urban areas as against 27.8 % in 2001. Urbanization ahead is likely to be faster and urban population is likely to spurt to 40 % of the population in the country. In this scenario, affordable housing is significant in ensuring hosing for.

How affordability criterion is determined

Disposable income is an important criterion in determining affordability. It’s government’s responsibility to ensure that the policy favours the intended beneficiaries. The government’s measures such as helping real estate developers to go for public-private partnerships (PPP) to execute affordable housing projects are commendable. In this article, we’ll discuss the policy measures in Union Budget 2016.

Policy measures

The authorities have declared to ensure universal housing by 2022. The measures declared are intended to benefit both developers as well as home buyers.

For developers, tax has been exempt for small size housing (home measuring 30 sq metres in metropolitan cities and 60 sq metres in cities other than metros). The intended homes have to be completed within a period not more than three years.

Developers will have to pay the MAT (minimum alternate tax). Research shows that the measures would make developers profitable.

Government's measures are likely to encourage developers focusing high-end housing (Rs 50 lakh and more) would take attention to more affordable versions of housing.

For first time home buyers who borrow up to Rs 35 lakh stand to benefit because of a deduction Rs 50,000 on interest payable on the loan. For optimal targeting, the value has been fixed at Rs 50 lakh, for which this exemption will apply.

There is no prefixed official price that could be tagged to affordable homes in India. There is no concrete rule for this in India. However, by convention, three factors are considered when defining affordability, namely the monthly income of the buyer, the size of the home and its price. The size corresponds to 200 - 300 square foot and price to 7-12 lakh.

A thing of concern is people within income bracket bigger than industrial working class cannot afford to buy 300 – 400 sq feet home within the proximity of 10 to 15 km from workplace. People in this category looking for homes can afford to buy homes prices at 30- 40 lakh with the aid of bank loans.

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