In the last five years, real estate has witnessed positive outcome in affordable housing, which has prompted a lot of developers to launch projects in this segment. Considering the trend, the share of affordable supply has been rising since 2015. The new tax reforms and beneficial schemes offered by the current government and the rising demand from the consumers have encouraged developers to launch more units in the affordable housing category. As a result, the share of affordable units today dominates the overall supply in the residential market by 40% to 45%.
According to a report in 2018, the same year had 60% of all the residential project launches were within the ₹ 50* lac bracket and most developers are now concentrating on the affordable and mid-range segment. However, demand is still much higher than the supply. Most experts believe that developers have realised the potential of low and mid-income sizes and have been rationalising product portfolio to match underlying end-user demand, and supply in the affordable housing segment will improve soon. Considering the demand side from the home buyers, affordable housing is the key driver for demand in the residential sector in the next few years. The various sops offered over the years have highly attracted real buyers as well as investors into the affordable segment. Investors now see the possibility of better returns as compared to other residential segments, including luxury and ultra-luxury projects. As of now, while end users are driving the growth of affordable housing, investors are eyeing it for decent returns. What are the factors responsible for driving returns? First, some state governments have capped the sale prices by various housing development schemes. Take Haryana government’s Affordable Housing Policy as an instance. There, a developer can charge a maximum of ₹ 4,000 per sq. ft from homebuyers. Apart from that, a home buyer can avail a subsidy benefit of up to ₹ 2.67 lac under Pradhan Mantri Awas Yojana. Secondly, additional perks on affordable housing make it attractive, which other housing segments do not enjoy. Thirdly, the average returns an investor can expect on a yearly basis are 8-10%, making affordable housing a significant game-changer. Experts also add that the housing projects which are within city limits or in an already developed locality will do better in terms of providing good returns. Projects that are in far-off areas will give approximately similar returns like other segments. Hence, if you wish to get on the affordable housing property in India and want to invest in an apartment, make sure the location is favourable and ensure the area has the necessary infrastructure. Most importantly, compare the prices before settling for a deal.
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