Property consultant Anarock said that only 29 per cent of nearly 140,000 dwelling units launched during the first six months of this year falls into affordable housing category and are eligible for various tax incentives offered by the government.
The government should relax the price cap of Rs 45 lakh in its definition of affordable housing so that more people can benefit from tax sops, the consultant demanded.
In recent Budget announcement, the government has increased the deduction of interest on home loan by Rs 1.5 lakh to Rs 3.5 lakh to boost demand for affordable housing.
Already, the GST rate is only 1 per cent for under-construction flats in affordable housing category and the Centre provides interest subsidy to home buyers through a scheme.
"Only a paltry number of developers have built housing that meets the government's criteria for incentivized affordable housing in 2019," Anarock Chairman Anuj Puri said.
Of the total housing supply of 1,39,490 units in the top seven cities H1 2019, merely 39,840 units meet these criteria.
"The Government's recent Budget bonanza' of an additional Rs 1.5 lakh tax deduction on interest repayment of home loans availed till March 2020 will benefit very few people in urban India," Puri said.
To avail credit subsidy benefits along with the new Budget sops for affordable housing, a home must be priced less than Rs 45 lakhs and not exceed 60 sq meter carpet area or about 850 sq ft built-up area, including overall loading.
Of the housing shortage of 19 million units in urban India, nearly 96 per cent pertains to the EWS and LIG categories - the target of the government's affordable housing push.
Mumbai Metropolitan Region (MMR) topped the list with the maximum launches of 17,700 units in this affordable housing category.
Pune came in a distant second with 9,350 units. Delhi NCR saw the launch of 6,950 units in this category in H1 2019. Bangalore, Chennai, Hyderabad and Kolkata together accounted for 5,820 new units in this category in H1 2019.
Unlike earlier, the consultant said that developers are quite keen on affordable housing, despite the lower profit margins.
Nevertheless, there are 'natural' barriers to deploying more supply in the government-stipulated affordable category, it added.
"High input costs in urban areas - High land prices in the municipal limits of the major cities (where urban affordable housing is most needed) make it unfeasible for developers to launch affordable housing projects there," Puri said.
Lack of basic infrastructure in the peripheral areas (where housing within Rs 45 lakh is feasible) discourages buyer interest, which curtails supply, he added.
Scarcity of land and restrictive affordable housing criteria are also hurdles in boosting supply in this category.
Talking about solutions, Anarock suggested that the government should unlock vacant land held by it.
"The government must seriously consider revising the pricing of homes that fall within the affordable housing price band, city-wise.
"While the prescribed unit size of 60 sq. m. carpet area is fairly appropriate, the prescribed pricing restrictions are not viable across most cities except in the far-flung peripheries which lack liveability and accessibility," Puri said.
If this price restriction is widened, Puri said many more homes will fall within the affordable price tag and qualify to get incentives.