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The credit-linked subsidy scheme for affordable housing has finally taken off, at least for the economically weaker section (EWS) and the low-income group (LIG). The demand from the middle-income group (MIG) is, however, lower than expected.
In the Union Budget for 2018-19, presented by Finance Minister Arun Jaitley in Parliament on February 1, the allocation for the EWS and the LIG has been increased to Rs 10 billion. Even for the current financial year (2017-18), the subsidy amount has been doubled to Rs 8 billion.
On the other hand, the allocation for MIG in 2018-19 is Rs 9 billion — lower than the planned FY18 allocation (Rs 10 billion). For this year also, it has been revised downward to Rs 6 billion.
“Marginal utility is higher for EWS and LIG category buyers, than for those in the MIG category,” said Sudhin Choksey, managing director, GRUH Finance — a subsidiary of the Housing Development Financial Corporation (HDFC) that focuses on affordable housing.
The scheme is available for first-time home buyers. In the EWS and LIG categories, beneficiaries can have an annual income of up to Rs 600,000. They are eligible for a maximum subsidy of 6.5 per cent interest subvention. Beneficiaries usually get a home loan of up to Rs 1.8 million.
For the MIG, first-time buyers with annual income of Rs 1.2 million and Rs 1.8 million can avail of the subsidy, which is 4 per cent for MIG I category buyers and 3 per cent for MIG II category, on loan amounts of Rs 900,000 and Rs 1.2 million, respectively. For the remaining amount, they have to pay interest at market rates.
According to real estate research firm PropEquity, 15,179 and 49,012 housing units for EWS and LIG segments, respectively, came into the market in the first 11 months of 2017. The data for December is still being audited. In the MIG-I and MIG-II categories, respectively, 30,196 and 1,106 units came into the market in the same period.
“Earlier, there were supply constraints for the EWS and LIG segments. But in the Budget last year, the government gave developers many concessions,” said Sriram Kalyanaraman, MD and CEO at National Housing Bank (NBH), the housing finance regulator.
HDFC claims it has been approving about 8,000 loans on an average every month to home buyers in the EWS and LIG segments, and disbursing about Rs 13 billion. The loan book of India’s second-largest mortgage lender was at Rs 3.42 trillion at the end of December last year.
It also said 39 per cent home loans it approved in the current financial year were towards EWS and LIG home buyers. On an average, its disbursement to these two categories was Rs 1.02 trillion and Rs 1.7 trillion, respectively.
The NBH claims it has provided subsidy worth Rs 16.96 billion under the credit-linked subsidy scheme, for 82,000 houses, since the Pradhan Mantri Awas Yojana (PMAY) was introduced in June 2015. This includes subsidy for MIG home buyers as well.
Anita Arjundas, managing director, Mahindra Lifespaces, said, “The EWS and LIG groups together constitute more than 95 per cent of the total urban housing shortage. The budgetary reallocation appears to be a redistribution of resources aimed at helping home buyers in these two segments.”
The PMAY aims to provide 20 million houses for the urban poor by 2022, disbursing financial assistance of Rs 2 trillion.
The subsidy scheme for the MIG was introduced only in December 2016. Sector experts are hopeful this will also pick up.