What is Affordable Housing?
There is a lot of focus today on affordable housing, as the government has come up with a lot of schemes and incentives. Affordable housing refers to housing units, which are affordable by that section of society whose income is below the median household income.
Affordable housing was given the “infrastructure” tag in 2017 in the Union budget. It has few benefits, where developers who are supplying affordable housing can get cheaper loans from banks as well as tax concessions and foreign funding. Property buyers can now look at affordable housing not just for residential occupation, but as an investment option too.
The Union government has taken few initiatives with regards to affordable housing
- Apart from the ‘infrastructure tag’, allocations of various housing schemes have been increased. The Pradhan Mantri Awaas Yojna scheme has increased the budget from Rs. 15,000 crores to Rs. 23,000 crores, an increase of more than 50%.
- The infrastructure tag will help builders and developers borrow at a lower rate of interest from financial institutions.
- Only a person whose income is below 6 lakhs per annum can avail the interest rate subsidy on home loans. There is a 4% subsidy on interest for loans up to Rs. 9 lakhs and a 3% subsidy for Rs. 9 to 12 lakhs.
Let us check a few points as to why should you invest in affordable housing?
For the end-users, the residents do not have to travel very far to provide a decent and comfortable life to their families. The affordable housing projects have decent quality schools, hospitals, and amenities for the residents.
For the developers, the product offering is increasing and getting better for the customers, as there are several developers and corporate houses participating in this sector.
For the investors, the tenure for long-term capital gains has been reduced from three years to two years. You can claim long-term capital gains after 2 years when you have sold the affordable housing property. It has encouraged more people to look at the property as a medium-term investment option. As the value of the property is less, it will provide much easier liquidity to the investors.
What is the right budget?
Anything that is less than INR. 50 lakhs within city limits of Bangalore and less than 2 lakhs in outskirts can be termed as affordable housing. Projects having more than 1 million square feet or area, would offer great amenities with good features without adding any cost.
A property buyer should always look for property in its own area, as he would be having more knowledge of the surrounded infrastructure. The buyers should look for the infrastructure developments that might occur in the area as well.
Factors you need to consider as an investor
It is advisable to keep in mind the following key factors, before making investment decisions in buying a new affordable housing as an investor-
Location, is the most crucial factor in the real estate investment. You should look for those locations which has growth in future, where you may need to pay a premium, but the return should compensate the risk.
Infrastructure, the infrastructure surrounded within the property is important for price value. The factors that attract the resale buyers are roads, availability of water and power, hospital.
Smart City Tag, cities with ‘smart’ tag is a good choice for affordable housing investment. The government has identified a few of the cities as smart cities, having a good and basic infrastructure. There is huge growth in such cities with good long-term returns.
You must always invest in a diversified portfolio. Investing in housing properties is a big challenge. Central Government’s approach to affordable housing has been a boost to the real estate sector, as the mid-segments people are looking for investment. Invest in the right property today!!