By Dr. Niranjan Hiranandani, CMD, Hiranandani Communities
Recently, the Reserve Bank of India (RBI) announced a policy decision, revising housing loan limits for Priority Sector lending (PSL) eligibility, from the existing Rs. 28 lakh to Rs. 35 lakh in metros, and from Rs. 20 lakh to Rs. 25 lakh in other locations. Given that loans under PSL are less expensive than those provided by the banks in the ordinary course, this has been seen as an ‘encouragement’ to boost buyer sentiment.
Dr Niranjan Hiranandani, Co-Founder & MD, Hiranandani Group and National President NAREDCO opined that, “The announcement made by the Ministry of Housing and Urban Affairs recently about carpet area SOPs for houses eligible for interest subsidy under the Credit-Linked Subsidy Scheme (CLSS) for the middle income group (MIG) beneficiaries under the Pradhan MantriAwasYojana (PMAY) will augment the construction activities and lead to enhanced demand, with similar intent as the RBI move on Priority Sector Lending (PSL). These decisions will boost real estate and enable more MIG home buyers to qualify for subsidy and avail benefits provided under the ambitious flagship mission of PMAY (Urban). The progressive impact of this move will be felt in peripheral areas of Metro Cities, such as NCR, MMR and Bengaluru, as also in Tier 2 and 3 cities.”
He further added, “The RBI’s announcement of hike in repo rate on home loans by 0.25bps making home loan interest rate at 6.25% against the advantage to the home seeker in terms of the CLSS benefits in form of interest subvention will be largely availed for a longer span of time of 20 years, in comparison to the marginal interest rate hike of 0.25 to 1.00 bps on home loans. Effectively, this will foster sales by discerning home buyers making the decision to buy their dream home.”
The Pradhan MantriAwasYojana is a flagship scheme through which the Indian Government aims to provide ‘Housing for All by 2022’. The announcement about the increase in the carpet area of houses eligible for interest subsidy under CLSS for MIG beneficiaries, effectively, creates a 33 percent increase in carpet area eligible for a subsidy. The larger apartment sizing up to 2100Sqft will be covered under the announced interest subsidy scheme for MIG section. This announcement aims at the multiplier effect of increasing construction activity, reviving demand majorly in the peripheral areas of metro cities, and tier 2 and tier 3 cities and push home sales with an enhanced positive sentiment among the home buyers. The announcement will give the much-required thrust to the MIG home buyers, which is the largest among the residential real estate segment.
Terming this as a decision which can also give a boost to rental housing, Dr. Niranjan Hiranandani concluded by pointing out that buyers of second homes, if also brought under the scheme, would be positively impacted – and, the end result would be creation of enhanced rental housing stock to meet the objective of supplying basic need of citizens i.e. Housing for All.