Infra status to affordable housing on anvil

In an attempt to push the pace of construction of low cost housing, the pet project of the current government, is aimed at delivering 20 million houses across India by 2020, the government has decided to accord infrastructure status to the affordable housing in the upcoming Budget. The ratification of the proposals has reached out to senior finance ministry officials and the Reserve Bank of India for gathering feedback on the proposed change and how to prevent it from being misused as the move would reduce costs for developers and attract investors. As a matter of fact, the important thing would be to define affordable housing or low-cost housing. And these projects will have to be insulated in a way that no one is able to take money out without completion of the project. Real estate developers have been under stress as they have borrowed funds at a higher cost.

In addition, banks are reluctant to lend money to the sector and the situation worsened after the November 8 announcement scrapping high-denomination currency notes, leading to a fall in real estate sales. In case affordable housing is given infrastructure status, it would lower the borrowing cost for the developers. Also, regulations should be simplified to directly borrow foreign debt, which can cost around 4-5 precent on dollar return, a partner at Deloitte Haskins & Sells, Hemal Mehta said. Echoing similar sentiments, industry experts opined that while it may appear to be a small change, categorizing low-cost housing as infrastructure could have far-reaching results. It may be recalled that real estate industry has been asking for the infrastructure status for affordable housing for the past three years, but this time it is only logical that it could go ahead. This is mainly because the Prime Minister has announced that the new scheme and infrastructure status will help reduce the borrowing cost and help accelerate growth, said an avid real estate market watcher.

Published: 16 January 2017