The enhancement of the carpet area for the MIG customers under the PMAY and revision of housing loan limits for Priority Sector Lending (PSL) are expected to bring cheer to the buyers in the affordable housing sector, believe experts.
The Housing and Urban Affairs Ministry recently approved a 33 percent increase in carpet area of houses eligible for interest subsidy under the Pradhan Mantri Awas Yojana-Urban (PMAY-U). With this move, the government aims to widen its reach among the beneficiaries, especially in the Tier II and III cities and the peripheral areas, where the housing cost is much lower.
Also, though the Reserve Bank of India (RBI), in its recent bi-monthly policy, hiked the repo rate for the first time in four years, it also decided to revise the loan limits for Priority Sector Lending (PSL), which may make housing loans cheaper in the metros, thereby taking a step to extend the benefits of affordable housing to a large section of people.
“The policy decisions reflect the government’s strong intent to achieve its Housing for All Mission by 2022 by enabling home ownership for every Indian. Besides, it also broadens the home ownership opportunity for eligible, first-time buyers under the PMAY scheme, while also providing the needed impetus to the supply dynamics.
Harshil Mehta, JMD and CEO, DHFL
“The hike in the repo rate was on the cards and hence, the borrowers can go ahead and secure a home loan since the interest rates are still attractive.
Nagesh Sharma, Financial Adviser in lending, Vertex Group
“The decision taken by the Ministry is in line with the vision of the RBI. Hence, the benefits of the PMAY scheme will now reach a large number of people.
Anil Gupta, Sector Head-financial sector ratings, ICRA Ltd
“CLSS has liberalised carpet area norm from 120 sq m to 160 sq m for MIG-I and from 150 sq m to 200 sq m for MIG-II. This is a great incentive for every aspiring MIG home-buyer and a big push to the Housing for All scheme.
Jaxay Shah, President, CREDAI National
For the affordable housing sector:
In order to boost the low-cost housing segment, the RBI has decided to revise eligibility of housing loan limits from existing Rs 28 lakh to Rs 35 lakh (which may lead to reduction in the interest rates on home loans upto Rs 35 lakh). The revision is as follows:
The way ahead for the home-buyers:
The government provides four percent interest subsidy for Rs 9 lakh in the case of MIG-I and three percent interest subsidy for Rs 12 lakh for MIG-II home-buyers; Under CLSS, each beneficiary can avail subsidy upto Rs 2.35 lakh on purchase of a house till 31 March, 2019; The realty market shall continue to be dominated by PMAY and affordable housing schemes; Customised home loan schemes with increased tenure would be a priority among banks.
The RBI report on growth statistics:
Construction activity recorded the highest growth in Q4 in the new series (base 2011-12); Two key indicators of construction activity showed improvement – cement production growth accelerated and steel consumption turned around.
PMAY benefits for the home-buyers:
The interest subsidy under PMAY is available for three categories of first-time home-buyers; Beneficiaries under the middle-income group stand to benefit as it is divided into two sub-categories; This is the second time when the government has revised the carpet area for the MIG segment in order to avail the subsidy.
The home loan agenda:
The default rate in housing loans in the range of Rs 10 lakh to Rs 35 lakh is comparatively low. Therefore, banks shall be tempted to lower their rates in the small-ticket home loan segment in order to increase their market share; The RBI data points out that the overall housing loan segment is worth Rs 16 lakh crore and the affordable housing constitutes 20 percent of this chunk; Around 15 to 20 percent of the housing finance companies are operating in the small-ticket housing segment.