Will affordable housing definition change in budget 2024?

With the interim Union budget for 2024-25 set to be announced today, real estate players are hoping that the finance minister will provide a boost to the sector with a change in the definition of affordable housing by raising the threshold limit from existing Rs 45 lakh.

Developers would also like to see an increase in the area limit for affordable housing units in terms of space.

According to a study by property consultancy ANAROCK, the affordable housing category saw a decline in overall sales to approximately 20 percent of the overall pie in 2023 from over 30 percent in 2022. Hence, many developers are expecting the government to deliver a boost for this category.

The revision in the definition of affordable housing has been a long pending demand of real estate developers and homebuyers.

Vihang Sarnaik, Director, Vihang Group said that he expects the finance minister to establish a separate affordable housing index for each Tier-1 and Tier-2 cities with impetus to the housing affordability of the metro cities periphery.

It is crucial to incorporate essential factors such as inflation, land cost, construction cost, approval cost, and labour cost for defining affordability in housing.

“For instance, in the case of Mumbai, where housing costs are notably high, we hope that the Budget will increase the price ceiling of affordable housing from Rs 45 lakhs to Rs 90 lakhs so that the whole affordable scheme benefits reach its intended audience. As per the current affordable housing scheme, the limit is set at Rs 45 lakhs and you will not find a single home in Mumbai in that price bracket,” he said.

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Sandeep Runwal, President, National Real Estate Development Council (NAREDCO) Maharashtra, voiced similar concerns and said that there is a need to redefine the definition of affordable housing to boost this segment and the demand.

“We propose an increase in the cap from Rs 45 lakh to Rs 1 crore, particularly in metro cities. This change is expected to significantly boost both affordable and mid-segment housing. The industry also anticipates the continuation of incentives for affordable rental housing schemes,” Runwal said.

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Earlier in November 2023, Dinesh Kapila, economic advisor at the Ministry of Housing and Urban Affairs had also said that classifying affordable housing as units up to Rs 45 lakh was unrealistic given the high price of land in cities.

He said that the finance ministry has been sent a proposal to “improve the definition of affordable housing”. Experts say that the price cap should be set at Rs 75 lakh, he added.

Nagaraju Routhu, CEO of Gurugram based Experion Developers, said that developers are optimistic to see a potential positive change in the budget, especially in the affordable housing sector, given that this is a general election year.

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“With the hike in property prices over recent years, a thoughtful adjustment of this limit, perhaps to Rs 60-65 lakhs, would create avenues for the expansion and availability of affordable homes. With this adjustment, there could be a significant contribution to making housing more accessible and catering to the needs of a broader segment of the population,” Routhu said.