Affordable homes now account for over 20% of all properties sold in India

A price correction in the real estate sector is proving to be a boon for first-time home owners. Houses in the affordable category – those costing less than Rs 25 lakh – now account for a 20% of all residential sales in India. The share of affordable houses in the property market has gone up from 8 percent in FY16 to 21 percent in the current financial year, according to data compiled by real estate consultancy firm LiasesForas. Developers are viewing this segment with renewed interest following a rise in demand. In the last three years, the share of luxury homes – those retailing for over Rs 2 crore – slipped from 14 percent to 5 percent. During this period, the sales of affordable homes almost tripled. A large number of pending deliveries of projects has dogged the real estate sector. The implementation of the goods and services tax (GST) and the Real Estate (Regulation and Development) Act (RERA) have contributed to the rationalisation of prices. Households with annual incomes of less than Rs 18 lakh are eligible for a subsidy of Rs 2.3 lakh, which is paid out upfront on a home loan. Besides this, they can avail income tax exemption on loans for housing. The government is also offering developers tax sops through the PM AwasYojna (PMAY). For affording housing projects, developers get 100 percent tax deduction on profits. Flats with a carpet area less than 30 sqmetres in four metro cities qualify for the deduction. The limit is 60 sqmetres in other cities. It is also mandated that projects undertaken have to be completed within three years to claim the incentives offered by the government. Developers are also diversifying their portfolio to cover the affordable housing segment. For instance, real estate firm Poddar Housing and Development has launched projects spanning a cumulative Rs 1 crore sq ft in low cost housing.