The infra tag to affordable housing will allow companies to access capital and improve liquidity and will provide better options for consumers, allowing them to buy their first homes, says Brotin Banerjee, MD and CEO, Tata Housing.
How will the infra tag accorded to affordable housing spur the concept of 'Housing for all'? How will this impact realty pricing in the current fiscal/over the next four years?
Infrastructure status for affordable housing was a long-standing requirement of the sector. This move should boost the volume of construction activity across the country, which has been struggling with reduction in the number of projects being launched over the last few quarters. This will allow companies in the sector to access capital and improve liquidity and will provide better options for consumers, allowing them to buy their first homes. The status of infrastructure to affordable housing will allow additional private players to participate, adding to competition. Leading developers can be expected to increase outlay in this segment, thereby contributing positively towards the government's commitment to providing 'Housing for all' by 2022.
India is on the cusp of large-scale urbanisation over the next few decades, with more than 1 crore population being added to its urban areas. It is expected that by 2050, 60 per cent of the population will be living in cities, meaning that the demand for houses will shoot up in these areas. To address this demand, participation from the private sector will not only bring in expertise, but also technology that plays an extremely important part in developing affordable homes.
Trust developers should focus their attentions on the opportunity created by budget incentives and government initiatives like Rajiv Awas Yojna (RAY) and Pradhan Mantri Awas Yojna (PMAY), in order to deliver quality and timely affordable housing in line with demand. A case in point is Tata Housing who not only pioneered the concept of green - affordable housing in India, but has already developed four townships across India under the brand Tata Value Homes.
Is the 'infra' status for the affordable housing segment adequate to spur investments by the private sector? What outcomes do you anticipate through this government emphasis?
The grant of infrastructure status to the affordable housing segment was a long pending demand and this will increase the resource allocation for the sector, catalysing housing supply and reducing the supply gap. The government has realised that housing and infrastructure can be two pillars to increase GDP and accelerate economic growth. The measures for affordable housing under the budget are advantageous to both the consumers and real estate developers.
Easy and dedicated access to institutional financing, and higher limit on external commercial borrowings will attract more investments and assure sustained growth of affordable housing in India, making it the core driving segment for real estate. Credit off-take will also benefit the developer - who will have access to cheaper funding. On the other hand, long term financing at lower rates will reduce costs of construction for developers, allowing them to pass on benefits to consumers.
Is it a feasible proposition now for infrastructure majors to get into the affordable housing sector?
On the infrastructure side, the government has proposed to invest to Rs 2,41,387 crore for infrastructure development in 2017-18. In the last three years, the total construction of 1,40,000 km of roads has provided last-mile connectivity to many satellite towns in and around metro cities. Further, a cumulative allocation of Rs 64,900 crore will allow the construction of roads and highways to be accelerated, giving an impetus to both the infrastructure and the real estate industries.
How does infra status translate into incentives, special dispensation and bankability? What additional incentives would accrue to investors getting into this infra status-driven affordable housing initiative?
Infrastructure status to the affordable housing segment will boost the investor sentiment in the industry. With this, banks will be willing to lend more to projects in the affordable housing segment, thereby creating larger access to funds. The Budget has lowered the holding period for gains to qualify as long-term in the case of immovable property to two years from three years currently. This will significantly reduce the tax burden of people selling properties after two years and make it more attractive for investment.
Also, clarity with regards to norms for REITs would encourage investment to a great extent.