Investor Interest has increased in Affordable housing .

Investor interest has increased in affordable housing, but it needs to carefully consider.

Are Affordable Homes for you?

In the last few years, affordable housing became the silver lining for the realty sector that has given negligible returns in the last few years.

In Market Supply and demand.

In the last five years, real estate has witnessed continuous fall in demand, with the exception of affordable housing, which prompted some developers to launch projects in this segment.

“The significant trend is that the share of new affordable supply has been rising since 2015. Interestingly, due to multiple sops being offered by the current government and the rising demand from ‘real’ users, developers are launching more units in the affordable housing category,” said Anuj Puri, chairman, Anarock Property Consultants. As a result, since 2017, the share of affordable units has dominated the overall supply in the residential market—45% in 2017 and 40% in 2018, added Puri.

According to a half-yearly (July-December 2018) report by Knight Frank India, a real estate consultancy firm, “during the period, 60% of all launches were within the Rs.50 Lakh bracket and most developers are concentrating on the affordable and mid-range segment.”

Despite the launches, demand is still much higher than supply. Pradeep Aggarwal, co-founder and chairman, Signature Global, an NCR-based developer with maximum projects in affordable housing, said, in a recent interview with Mint, “Affordable housing witnessed a growth of 22% in sales during 2018. Even this number is not big because there are only a few developers in this segment at present. Demand is huge and supply is limited. Once more developers start offering projects in this segment, it will witness tremendous growth.” Read the full interview .

Most experts believe that supply in affordable housing segment will improve as developers are now focusing on the segment. “Developers have realized the potential of low and mid income ticket sizes and have been rationalizing product portfolio to match underlying end-user demand. The trend will continue in the medium term as well,” said Rahul Prithiani, director, CRISIL Research.

On the demand side, “we foresee affordable housing to be the key driver for demand in residential sector in the next few years,” said Nikhil Bhatia, managing director and co-head, capital markets, and head, western region, CBRE India.

Should you invest?

Whether it’s for end use or investment, capital appreciation is always a matter of concern. Like Dokania, many buyers feel there is scope of price appreciation in the affordable segment. “The multiple sops offered over the years not just lured ‘real’ buyers but also investors into the affordable segment,” said Puri.

Previously dominated by end users, the affordable segment is now also attracting investors who see the possibility of better returns as compared to other residential segments, including luxury and ultra luxury projects. Currently, even while end users are driving its growth, investors are eyeing it for decent returns, added Puri.

Various factors are expected to drive returns. First, some state governments have capped the sale prices by various housing development schemes. For instance, under Haryana government’s Affordable Housing Policy, a developer can charge a maximum of 4,000 per sq. ft from homebuyers. Apart from that, a homebuyer can avail a subsidy benefit of up to Rs. 2.67 Lakh under Pradhan Mantri AwasYojana.

Compared to other housing segments, additional perks on affordable housing makes it attractive. “Affordable housing is touted to be the major game-changer. The average returns an investor can expect on a yearly basis are 8-10%,” said Puri.

However, some experts believe that not all affordable housing projects are going to provide good returns. “Projects which are within city limits or in an already developed locality will do better, but such projects are limited. Projects that are in far-off areas will give approximately similar returns to other segments,” said Mudassir Zaidi, executive director, north, Knight Frank India.

If you want to ride on the affordable housing wave and want to invest in an apartment, be careful about the location and ensure the area has basic infrastructure. Also, compare the prices before settling for a deal.

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GST Council to Consider 5% GST on Under-Construction Homes

GST Council to consider 5% GST on under-construction homes

The GST Council is slated to meet on January 10 to discuss lowering GST on under-construction flats and houses to 5%, as well as hiking exemption threshold for small and medium enterprises.

The council, in its previous meeting on December 22, 2018, had rationalised the 28% tax slab and reduced rates on 23 goods and services. This would be the 32nd meeting of the council, which is chaired by Finance Minister Arun Jaitley and comprises his state counterparts.

Briefing reporters after the recent council meeting, Mr. Jaitley had said that the next meeting would consider rationalisation of tax rates on residential properties and raising the threshold limit for MSMEs from the current 20 Lakh. Also, the council would consider a composition scheme for small suppliers, apart from discussing levying a calamity cess as well as GST rates on the lottery.

The GST Council is likely to consider lowering GST on under-construction flats and houses to 5%, an official said. Currently, the Goods and Services Tax (GST) is levied at 12% on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale.

However, GST is not levied on buyers of real estate properties for which completion certificate has been issued at the time of sale.  An official said that this 12% GST rate ideally would have been partially offset by way of taxes paid on inputs by builders and hence the actual incidence of GST on under-construction home buyers would have been around 5-6%. However, builders are not passing on the input tax credit (ITC) benefit to consumers.

“One of the proposals before the council is to lower the GST rate to 5% for builders who purchase 80% of inputs from registered dealers,” an official said. Also the report of group of ministers looking into the concerns of MSMEs under the GST regime would be taken up for consideration.

Currently, businesses with a turnover of up to 20 lakh are exempted from GST. The Council could consider hiking the threshold to 75 lakh for only MSMEs.

“An in-principle unanimous decision was taken that a composition scheme be framed for small service providers. The threshold and composition charge would be decided in the next meeting,” Mr. Jaitley had said on December 22.


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