The government's granting of infrastructure status to affordable housing segment was less than what the developers had hoped for

One of the consistencies on display by this government has been its steady support for the affordable housing segment.
For the last two consecutive Union budgets, the finance minister has not just kept his gaze consistent on the subject, but has also fine-tuned some of his earlier announcements, lately offering infrastructure status to this segment.
These initiatives have been hailed as the right moves, though not entirely game changing, even as the sector and its important stakeholders have been keen to embrace these measures.
The bottom line though is this: it needs more time for the affordable housing segment to really take off.
In last year’s budget, the first time that the government came out with certain measures targeted exclusively at the affordable segment, the finance minister announced dwelling units of 30 sq m in metros and 60 sq m in other cities to qualify for affordable housing segment.
This year, he fine tuned it to enhance the size, from built-up area to carpet area and restricting the 30 sq m size classification to municipal limits of metros, thereby enabling builders to launch units of 60 sq m sizes in the peripheral areas of the metros as well.
The government’s granting of infrastructure status to affordable housing segment was less that what the developers had hoped for – a similar status for the whole industry. They have nevertheless welcomed the initiative, which may enable them to access cheaper funds, no small consideration.
It is no secret that the real estate sector has been going through challenging times for the past couple of years. It was in dire need of proactive policy changes to take it out of the red zone.
The sector’s importance cannot be over-emphasised, for its health has a direct impact on India’s economic well-being.

Says Ashwinder Raj Singh, CEO, residential services, JLL India: “The recent budget announcements have created a lot of excitement in the sector, largely for the right reasons. With an infrastructure status and other incentives, this segment is likely to receive a major push in terms of access to priority (low cost) funding from banks and other institutions, thereby spurring interest from private players as well,” said Anshuman Magazine, chairman – India and South East Asia, CBRE.
He added: “Various cities in India, such as Gurgaon in Delhi-NCR, have already seen developers foray into low-cost housing projects. With developers in a position to gain access to priority lending coupled with relaxation in sizes of units and completion timelines for tax benefits, the reluctance to launch projects due to smaller size and profitability constraints is likely to ease significantly.”
“Because of the fact that it has been given infrastructure status, affordable housing will now benefit from cheaper sources of finance including, but not restricted to, ECBs. Also, re-financing of housing loans by NHB can give a leg up to the sector,” says Anuj Puri, chairman and country head, JLL India.

According to him, considering the dire need for low-cost homes in India, the demand for affordable housing will sustain for decades to come. “We are hoping that with the new provisions and incentives that affordable housing has been given, more developers will now become interested in this sector,” he observes.
The government’s focus on ‘Housing for all’ includes a larger share of rural housing, for which interest subsidies have been offered.
But these houses, coming in the price bracket of Rs 9-12 lakhs, are mostly termed as ‘kuccha houses’, which are unlikely to attract many private developers.
The private sector may be keen to focus on the specific – 30 sq m and 60 sq m – that could actually translate to 400-720 sq ft or slightly more (in terms of carpet area) under the affordable housing segment to built in urban cities and its peripheries.
“I do not see any role for big developers in building kuccha houses, since there are no big incentives. But, developing affordable housing units offer scope and we are looking at launching new projects, to build around 10,000 residential units, for this segment for our existing land bank across cities,” says M Murali, managing director of the Bengaluru-based Shriram Properties.

But he also adds that funds, which are just 1.5- 2 per cent cheaper, may not be a great incentive, while lower interest rates for housing loans could trigger higher demand. “While funding cost has to become more cheaper, the lack of on-time approval continues to be a big hurdle,” he added.
Points out Manju Yagnik, vice chairperson of Mumbai-based Nahar Group: “A 30 sq m residential unit may, at the most, be a one-room and kitchen facility. That is a size that even the average middle class family may not look at, especially since an average family will be a family of four plus dependent parents. So, the government should have uniformly made it as 60 sq m dwelling units and also not limiting it to peripheral areas of metros.”
“Unlike Mumbai, cities like Hyderabad and Pune offer great potential for development of affordable housing segment due to their scope for expansion across all sides. It would have been great, had the government offered tax incentives across segments, at least mid-segment, and make housing more affordable to enable better all round growth,” she added.