Reforms in the economy accelerating the affordable housing finance growth

March 12, 2018 admin Property Insights

The affordable housing scheme is one of the most ambitious projects of the government. The growth in supply is around 15% in the last three months, in terms of new launches, in comparison to the previous quarter. The affordable housing and finance sector has experienced growth in recent time. Several reforms in the economy have been incorporated, including the inception of RERA and exemption of GST on affordable housing. Presently, three trends in the real estate sector have been evident.

 Affordable housing

 The goal of the affordable housing scheme is to provide homes at low prices to people belonging to the lower and middle-income groups. Between January and September 2017, affordable housing witnessed a growth of 27%. The implementation of the PMAY has made it possible for people to avail these affordable homes. The increased inflow of formal credit has further strengthened the sector. The government aims to provide housing facilities for all the citizens by 2022, which involves a business opportunity of around INR 6 lakh crore. Apart from these, various progressive initiatives for reforms have been undertaken in 2017. These have helped the housing industry to grow to a great extent. The Real Estate Regulation Act (RERA) has enhanced the transparency in the sector, strengthening consumer trust. A comprehensive taxation structure has been developed in the form of GST. The Real Estate Investment Trusts (REITs) have also favoured the homeowners to buy the properties.

 Impact of RERA

RERA is the first real estate regulator of the country and each of the union territories has got a regulator who frames rules governing its operations. The RERA will create a more equitable transaction mechanism between the buyer and the seller through an organized approach. It will ensure greater transparency and higher accountability in the industry that will benefit all the stakeholders.

The homeowners will face little or no legal hassles while obtaining loans for housing. It is possible to keep a track on the records of the developers, additional leverages on properties, and so on. The certification of RERA enhances the eligibility of the project for home loans. However, the eligibility criteria for individuals who are applying for home loans remain the same.

Goods & Service Tax

 GST has included service tax, VAT, central excise and other local levies, helping in the establishment of a uniform market. This will contribute to the overall growth of the GDP.

 GST on home loans

You should note that the interest component of home loans has no GST or service tax. In the same way, any stamp duty that is charged while documenting the home loan will remain unchanged. This is because the stamp duty is not included in the GST.

The future of affordable homes looks bright. The reforms introduced in the economy in the form of RERA and GST have created a favourable business environment in the real estate sector. The home loans come at low rates of interests and the middle and lower sections of the people enjoy the access to capital. The banks are offering attractive deals to the property buyers in order to make the homes more affordable.

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