Housing – a roof for the common man, has been a challenge in an overpopulated country like India. To add to this, the excessive black money generation led to high real estate prices especially felt in metros like Mumbai.
Many analysts, business advisories, corporate consultant companies, chartered accountants & lawyers in Mumbai and elsewhere have tried to study the effects of demonetization announced in November 2016 on real estate. It is hoped that the reduced circulation of black money will make real estate more attractive to consumers.
Our Honourable Prime Minister Narendra Modi has always been vocal about providing affordable housing for the poor and the middle class and announced his objectives vide the Pradhan Mantri Awaaz Yojana.
In keeping with the objective to ensure homes for the poor and middle class in both rural and urban areas, three new middle-income categories have been created under the Pradhan Mantri Awaaz Yojana in urban areas. The number of houses being built for the poor in rural areas under the Pradhan Mantri Awaaz Yojana is also increased by 33 per cent.
The government has currently announced three new subsidy slabs to spur real estate and achieve housing for all by 2022. The slabs will apply to loans with the tenure of up to 20 years.
As per the scheme, homebuyers will get a subsidy at different rates depending on the income bracket they are in. People earning less than Rs 6lakh per annum will get a subsidy of 6.5 percentage points on a principal component of Rs 6 lakh, regardless of their total loan amount. For e.g.: If a person with income less than 6 lakh per annum borrowed money at 9% rate of interest, he will pay only 2.5% interest (9%-6.5%) on loan amount of 6 lakh, and the higher prevailing rate (9%) on the remainder of the loan.
In the next bracket, people earning up to Rs 12 lakh per annum will get interest subsidy of 4 percentage points on a principal component of Rs 9 lakh, and the highest income category of Rs 18 lakh per annum will get a subsidy of 3 percentage points on a principal component of Rs 12 lakh.
These measures should undoubtedly bring cheer to home buyers falling within the prescribed categories. They can now look at buying houses which were initially beyond their reach. This, in turn, should also give a boost to the real estate sector which was seeing a slump and have a positive cascading effect on the economy.