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Subsidy extension to spur demand for affordable housing, say experts

The scheme, which has been extended to March 2021, offers interest subsidy of 3-4% to middle-income groups, depending on their income levels

Topics
Affordable housing | Nirmala Sitharaman | housing loans

Raghavendra Kamath & Samreen Ahmad  |  Mumbai 

housing
Baijal, however, said that for demand for housing to return, irrespective of the category, the economy must start growing at a stable rate providing individuals financial security

The extension of the Credit Linked Scheme (CLSS) by one more year is expected to boost sale of properties in the country.

The CLSS for the mid-income group -- those earning between Rs six lakh and Rs 18 lakh -- was started in May 2017.

The scheme was to end on March 31 this year. Now it has been extended to March 2021, the Finance Minister said today. “250,000 middle-income families will benefit during 2020-2021 and will lead to investment of over Rs 70,000 crore in housing,” the minister said.

Borrowers in MIG-I (middle income group) category with income from Rs six lakh to Rs 12 lakh get an interest of four per cent and MIG-II category with income slab of Rs 12 to Rs 18 lakh gets interest subvention of three per cent.

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“The extension of CLSS for another year will help demand for the sector to inch back as and when the economy starts to revive. This in turn will help the construction sector to restart operations at the earliest possible,” said Shishir Baijal, chairman and managing director, Knight Frank India, a property consultant.

Baijal however said that for demand for housing to return, irrespective of the category, the economy must start growing at a stable rate providing individuals financial security.

“The extension of the CLSS under PMAY (Prime Minister Awaas Yojana) will definitely help sustain the demand for affordable housing,” said Kamal Khetan, chairman and MD of Mumbai based Sunteck Realty.

Ashish R Puravankara, managing director of Bengaluru-based Puravankara, said that the extension will hopefully push the fence-sitters towards making their first home buying decision. "The rise in consumer sentiment post COVID is essential for the industry and several measures like the CLSS extension should be implemented to instil confidence in the sector, especially the segment," Puravankara said.

Another Bengaluru-based developer Murali Malayappan, Chairman and Managing Director of Shriram Properties said this step is a booster for the government’s dream project PMAY – Housing for all, as it will benefit more than 250,000 families belonging to the middle income group. “It will also fuel related sectors such as building materials, cement and steel,” he added.

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According to Anarock Property Consultants, there are currently 1.56 million under-construction units across the top seven cities, of which nearly 39 per cent are in the affordable segment priced less than Rs 40 lakh.

Anuj Puri, chairman of Anarock said that as a ripple effect of increased demand for affordable housing, it will positively push demand for raw materials like cement, steel, transport and other construction materials.

Sitharaman said the government will also launch a rental housing scheme in PMAY which aims to provide affordable rental homes to urban poor and migrant labour in urban areas.

Khetan of Sunteck Realty said the allocation planned for providing basic rental accommodation under the PPP model is certainly a better way to improve the quality of living for urban migrants and poor in big cities.

CLSS for mid income group

  • The CLSS for mid income group was started in May 2017.
  • The scheme was to end on March 31, 2020; Extended till March 31, 2021
  • 250,000 middle income families will benefit during 2020-2021
  • It will lead to an investment of over Rs 70000 crore in housing
  • Borrowers in MIG I wil get an interest of 4 per cent
  • MIG II category gets interest subvention of 3 per cent

First Published: Thu, May 14 2020. 18:49 IST
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