The importance of affordable housing in the real estate sector is undeniable
. In fact, the collapse of the housing market and waves of foreclosure that have swept across the country since the economic recession began in 2007 have forced the nation to take a critical look at the affordable housing policies. And, in a bid to attract more developers and meet the shortage of 25 million houses in the country, the Union Ministry of Housing and Urban Poverty Alleviation are in the process of finalizing a brand new affordable housing policy which will give some boost to a weakening real estate sector.
The Union Budget had announced access to external commercial borrowing (ECB) for affordable housing but the industry wasn't excited due to low margins in this category. Now, the Union Ministry of Housing and Urban Poverty Alleviation (Mhupa) is in the process of framing an affordable housing policy, expected to be finalized in two months.
The policy will raise the floor space index to compensate developers for high cost of land and also ease density norms. It would give capital and interest subsidy to developers. Compulsory parking lot norms will also be relaxed. Even government land would be auctioned on the basis of who could build maximum number of low cost houses. In other words, government land will be auctioned and given to those developers who promise to build the highest number of units for the economically weaker section (EWS) and for the low income group (LIG). The government is also planning to introduce more and more affordable housingprojects which will be suitable for middle class family of the country.
On the other hand, the government is also making strict riders for the ECB borrowing so that money cannot be borrowed for low cost housing and transferred to other segments. So the government could mention specific projects and developers that could access the ECB funds and also mention specific channels like National Housing Bank to borrow the funds.
Such a policy will also be beneficial in Tier II cities like Bhubaneswar where affordable housing is emerging as the new mantra. While the policy will encourage more players to enter the market, the buyers will have reasons to cheer about.