New Delhi/Bengaluru: More homebuyers will be eligible for interest subsidy under the Pradhan Mantri Awas Yojana (PMAY) after the government on Tuesday eased carpet area restrictions in a bid to reduce the glut in the housing market.
Current rules restrict the subsidy eligibility to buyers purchasing homes having a maximum carpet area of 150 sq. m and 120 sq. m in the two middle income group categories respectively. A Union housing ministry statement said this has now been increased to 200 sq. m and 160 sq. m respectively.
This will help clear the existing unsold housing stock in many markets, kick-start construction demand and boost economic activity besides helping home buyers purchase more spacious dwellings. The relaxation—the second increase in carpet area in less than a year—targets a potentially crucial voter base of the government ahead of the general elections in 2019.
In November, the cabinet cleared the increase in carpet area limit to 150 sq. m from 110 sq. m for households earning between ₹ 12 lakh to ₹ 18 lakh a year and to 120 sq. m from 90 sq. m for households earning between ₹ 6 lakh to ₹ 12 lakh a year.
The government is targeting to provide housing for everyone in urban areas by 2022. Under the scheme, middle income homebuyers can get an interest subsidy of 3-4% for loans ranging between ₹ 9 lakh to ₹ 12 lakh.
Siva Krishnan, managing director (developer solutions) at real estate services firm JLL India, said it will help increase the horizon of inventory available for end users.
“Because of RERA and demonetization, housing supply has become reasonable as against the glut we witnessed between 2010-2013. Now, the demand may also increase as more homebuyers pre-pone their decision to buy their house to take advantage of the interest subsidy while buying spacious homes," he said.
A housing finance expert who did not wish to be identified pointed out that increasing the carpet area upper limit may not be the right targeting of the subsidy and that increasing the carpet area at the lower end of the spectrum may be more desirable.
With low-income households unable to generate the right margins and high-end homes not finding takers, it is mid-income projects that most developers are betting big on to bring back elusive buyers. With the increase in carpet area limit, homebuyers would now have a wider pool of residential units to choose from, which could spur demand.
M. Murali, managing director, Shriram Properties Pvt. Ltd, said he expects a boom in mid-market homes segment in the next two years given the kind of supply coming in and the increase in demand owing to the incentives offered by the government. “It will benefit first-time buyers and such incentives and increase in area will bring more and more buyers into the net," he said.
For real estate developers, the mid-income segment offers profitability and sales volume during a time of unprecedented slowdown in the sector. It has helped that the government’s incentives for housing have also been in this price segment, boosting the confidence of builders and buyers alike.
VBHC Value Homes Pvt. Ltd, which started off with low-income housing projects, is now focusing on bigger, one and two-bedroom homes, which are more in the mid-income category. Entrepreneur Jaithirth Rao, who heads VBHC Value Homes said that slowly but steadily, the government’s approach towards housing is to help and empower buyers to own a home and support and subsidize the process.
“Directionally, we are on the right path. The government is finally getting rid of artificial restrictions and making home-buying an easier process for buyers," Rao said.
Bengaluru’s Puravankara Projects Ltd, under its value housing firm Provident Housing, earlier said that it plans to launch 9-10 million sq. ft of homes in the ₹ 30-50 lakh mid-income segment in southern India.