Will Affordable Housing Boost Real-Estate Market?

Post demonetization, the real-estate market is buzzing with speculations. There are divided viewpoints with respect to the impact of demonetization on the realty market. While some suggest that home prices will decline, others opine that the disbandment of old currency notes has little to no impact on the property market. For an average home buyer or investor, the current scenario is very confusing. Therefore, the premise of this article is to highlight the status of the realty market, its future and key takeaway for potential investors and buyers.

India Brand Equity Foundation, a trust established by the Department of Commerce, Ministry of Commerce and Industry, Government of India revealed the following information in its latest (April 2017) report – The real estate market in India is expected to reach US$ 180 billion by the year 2020. The compound annual growth rate will be around 11.2 % (between FY 2008-2020)

The commercial property sector shall witness a tremendous growth

These trends and numbers are great news for property stakeholders and investors. But what about average home buyers? For example, what should a first-time buyer from the city of joy considering buying a property in Kolkata for his family expect? What’s store for him and his family? Or a salaried single woman from Delhi, can she dream of owning a house someday? These are pertinent questions that an average person or family in the country has.

Fortunately, the Union budget 2017-18 has given a glimmer of hope to an average home buyer. During his speech in the parliament, Finance Minister Mr. Arun Jaitley announced the “Affordable Housing” to meet the objective of another scheme known as “Housing to All” by 2022. This is a welcome move for both first time home buyers and realty stakeholders and will foster the involvement of private players in the market.

Key Announcements Associated with Real-Estate in the Union Budget of 2017-18

Affordable housing receives infrastructure status
Real Estate Developers to receive tax relief on unsold inventories
Bid to re-finance Rs. 20,000 crore loans by National Housing Finance
Pradhan Mantri Aawas Yojana to receive Rs. 23,000 crore
Indira Aawas Yojana to be extended to nearly 600 districts
Rs 64,000 crore allocated for the construction of National Highway

The idea behind these decisions is to decongest the urban areas and to develop the Tier I and Tier II cities by focusing on road infrastructure, manufacturing sector. We are all aware of the rising property prices in the big cities like Delhi, Gurgaon, Bangalore and Mumbai. Although, affordable housing projects has been initiated in these cities, Kolkata has topped the charts in this segment.

According to a Business Standard Article-

Between Jan-Mar 2017, there was a 53.9 % jump in the number of new homes announcements
Unsold stock or property in Kolkata reduced by 05.% and prices eased by 1.5%

These numbers clearly indicate that the demand for homes and announcements of new housing projects that plummeted post demonetization recovered sooner than expected. We are yet to understand the impact of demonetization on the luxury real estate segment. However, this bold move by the Modi Government has opened avenues for the affordable housing projects in India.

Closing Thoughts

Owning a house is the dream of every average family in India. For better opportunities and prospects lakhs of people move to big cities. However, the charm of a big city is short lived as the expenses mount and living becomes a challenge. Simultaneously, the influx of a huge population to these cities reign havoc on the infrastructure. Fortunately, affordable housing projects will unleash relief on so many levels. The burden on major urban centers will come down and at the same time people can hope for a better standard of living.

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