Affordable housing as the name suggests is a type of housing that can help a salaried individual buy a house without having to forego savings. Catering to the medium level buyers, affordable housing comprising of 2BHK, 3BHK flats and apartments are a major pull for the Indian middle class which is dreaming to build homes without extending their budget margins. In fact, pundits in the property sector claim that over 30 per cent growth is expected in the affordable home segment. It is no longer seen as a low-market or a segment catering to the lower middle class. In fact, affordable housing is now more about catering to the middle budget income families as a respectable segment providing all the necessary amenities.
Though the Government has been pushing affordable housing segment for the longest time since 2007, the segment has been undergoing issues ranging from high construction costs to land costs. Combined with lack of benefits for developers in the segment and lack of tax exemptions, the developers have mainly stayed away. But things are starting to improve with the Government’s ambitious Pradhan Mantri Awas Yojana (PMAY) which focuses on ‘Housing for All by 2022’. The programme aims to build over two crore homes in the urban sector as well as reaching the interiors in the rural sector.
Another measure that many experts see as a positive change in this segment of real estate is the regulator, Securities and Exchange Board of India (SEBI)’s move to ease regulations in the debt mutual fund by increasing the investment range in Housing Finance Companies from 10 per cent to 15 per cent. This according to experts could be a boost to the affordable housing sector in the country. Regulations brought in place by SEBI have time and again proved beneficial for the markets in the country by keeping taut checks on investments’ risk profile, on the value of investments and the maturity profile of funds in tandem with the investment goals. SEBI has mentioned that these debt mutual funds have to have higher rate of investment rating to compensate for the increase in percentage and should be registered with National Housing Bank. The increase is besides the sectoral limit which continues to be at 25 per cent.
Debt funds have starting to be seen as an alternative to fixed deposits in banks. They are considered at par and even better in comparison to fixed deposits owing to their liquidity in emergency situations in your daily life, accruing tax benefits for these funds for over three years and TDS reducing paperwork. The returns on debt mutual funds are considered to be higher as the investors in such funds carry both interest rate risk and credit risk. However, credit risk borne by the funds need to be closely monitored in order to achieve your investment goal.
Considering the PMAY, the move is seen as aiding additional money flow into the Housing Finance Companies which will impact more loan disbursal to home buyers and increase their borrowing capacity.