The size of houses eligible for government’s interest subsidy has now been increased by 35%. Will this attract more homebuyers and developers to the realty sector? We ask the experts.

Amit Oberoi, national director, knowledge systems, Colliers International India

The government’s decision of increasing the carpet area for the mid income group (MIG)-I and MIG-II segments to 120 and 150 sq m respectively, is a welcome step. However, it is not a game changer for the residential real estate sector. With this measure, the government has better aligned the proposed incentive with the typical requirement of most consumers, thereby likely increasing the number of people who can take advantage of this benefit. Also, the consumer will be able to buy a house of higher ticket size as her eligibility improves with this subsidy. Under this plan, a person earning Rs6 lakh to Rs12 lakh a year will get a 4% interest subsidy for a home loan of up to Rs9 lakh, and for those with annual income between Rs12 lakh and Rs18 lakh will get 3% interest subsidy for a home loan of up to Rs12 lakh. However, for most buyers this will most likely be a subsidy on the partial home loan amount, as the loan component of the total price of the house in these categories will far exceed the Rs9 lakh and Rs12 lakh cap. The interest rebate can lead to significant savings when considering the total outflow over the tenure of the loan, even though on an EMI basis, this will appear to be a small amount. An improving economy will be a more significant and impactful demand driver for the residential real estate sector.

Samir Jasuja, chief executive officer, and founder, PropEquity

Recently, developers had launched several projects to cash in on subsidies under the Pradhan Mantri Awas Yojana (PMAY) eligible projects, but uptick in these was hampered by small home sizes.

In the Delhi National Capital Region (NCR) and Mumbai Metropolitan Region (MMR) for the two segments of houses under Rs30 lakh and up to Rs75 lakh, for the four quarters ending Q2 2017, versus the corresponding previous four quarters.

We believe this move for MIG-1 and MIG-2 is an excellent decision for the affordable housing segment as now more projects can come under this scheme. It is beneficial for developers as now the projects that meet its criteria, will be able to attract more buyers looking to benefit from the scheme.

In addition, buyers too are in a good position as they can now purchase a house of bigger size and still avail the subsidy that PMAY offers. Several top developers across metros in India are firming up their plans to launch affordable housing projects, which could benefit from the PMAY scheme. Going forward, we will see new launches and renewed focus from developers to clear the existing stock.

Maximum demand will continue to be for such projects, which are constructed or about to be constructed as end-users will push demand for this segment of housing.

Anuj Puri, chairman, Anarock Property Consultants

The increase of designated carpet area that PMAY has provided for the MIG category homes holds immediate and long-term benefits for a massive cross-section of Indian homebuyers, as well as for developers focused on such houses. We will see a significant resurgence in demand, as bigger flats have now come under the purview of PMAY benefits. This comes as an added stimulus over and above the existing interest subsidy scheme. We will see developers notching up faster sales of their unsold inventory.

The Housing and Urban Affairs Ministry estimates the prevailing shortage of urban housing at about 10 million units, which is a sizeable decrease from the 18.76 million units projected in 2011. The expanded definition of homes under PMAY comes at the right time and will definitely contribute significantly towards the government’s ‘Housing for All by 2022’ mission, which is now beginning to look increasingly feasible.

Additionally, real estate regulatory authority has now made it mandatory for developers to sell their properties solely on the basis of carpet area, as opposed to the previous system of quoting super built-up area. Buyers of the highly budget-critical affordable houses will now know exactly what they’re paying for, which makes decision-making easier and the whole purchase process far more transparent.

Sudhir Pai, chief executive officer,

Yes the government’s decision to increase the carpet area of houses eligible for interest subsidy under Pradhan Mantri Awas Yojana (Urban) will certainly attract more developers and homebuyers towards the segment. Our analysis of 2 BHK and 3 BHK segments across different sizes and budget segments reveals that consumers are opting for larger homes. Consumer preference show that there is a shift towards larger apartment sizes in the 1,250-2,000 sq.ft range. As speculators exit and end users are the only buyers today, developers are catering to user expectations. The PMAY also offers tax breaks and incentives to builders to build houses that meet this end-user demand. With RERA and GST...there is already a weeding out of non-serious companies and the market is moving towards building project management capabilities for timely delivery. We expect technology, quality and timely delivery of rational-sized houses to drive the aspirational middle class to start buying without fear of delay.

Combined with the Credit Linked Subsidy Scheme that has put more money in the wallets of consumers, both supply and demand will soon match. Launch of new projects varies from market to market, depending on the current inventory overhang. But it is now a matter of when, not whether, developers will build more MIG housing.