Affordable housing is steadily proving to be a dominant segment in Indian real estate going by the latest studies and reports. Homes in the affordable segment, i.e. properties which have prices lower than Rs. 25 lakh now account for a whopping 20% and more of all residential real estate sales volumes in the country. Affordable housing now constitutes 21% of the Indian property market as compared to 8% in FY16 as per reports. Real estate developers are taking a huge interest in this segment at present with increasing demand for homes. The Government has also come out with benefits for economically weaker sections in order to enable them to buy their own homes. The PMAY benefits and interest subsidies have also stoked demand in this sector.
The market share of luxury properties, i.e. those priced above Rs. 2 crore, has come down to 5% from 14% over the last 3 years as per several studies. In this time, sales volumes have tripled in case of affordable housing units as per reports. The realty sector was previously saturated due to the high number of projects pending for delivery and considerable levels of unsold inventory. However, prices have corrected and become more reasonable in most markets post the implementation of GST and RERA which has also been a game changer for the real estate sector in terms of ushering in greater transparency and improving buyer sentiments.
According to experts, the Government incentives have played a major role in attracting more real estate developers and buyers to the affordable housing category. Homes with annual incomes lower than Rs. 18 lakh can get up to Rs. 2.3 lakh in interest subsidies paid out upfront on their home loans along with tax benefits on loans which are anyway available. Developers are getting tax benefits via PMAY and 100% tax deduction is given on profits in case of affordable housing projects. Apartments with carpet areas lower than 30 sq. metres in four metro cities are eligible for this deduction and this 60 sq. metres in other cities. Projects have to be finished within 3 years in order to be eligible for government incentives.
Affordable housing accounts for a major chunk of real estate sales in India
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