Year 2017 Is The Best To Buy Affordable Housing

A massive number of applications have been received through various channels of the government, for different credit-linked subsidies for housing loans, in the past few months. Now that the online internet penetration is not up to the expected level in this country, it does not pose a problem according to the Ministry of Housing and Urban Poverty. It may require some facilitation. Job opportunities will be developed in those areas too.

The Credit Linked Subsidy Scheme (CLSS) was the Housing Ministry’s effort to merge finance availability into the Prime Minister’s vision of a liveable house for every Indian family by 2022. In the earlier days, there seemed a significant shortage of houses but currently, the subsidy sanctions are seeing a lot of improvement.

In the previous budget of CLSS, an announcement was made under the Pradhan Mantri Awas Yojana (PMAY) for a 6.5% interest subsidy to be credited into the borrower’s account for the first Rs 6 lakh of loan availed for buying a house of 30 and 60 sq m carpet area. The total income of the family was to be Rs.6 lakhs. For the first time in history, the government has come up with schemes for the lower income group which had only been orchestrated in the past by several authorities without reaching fruition.

With the announcement of the Prime Minister’s credit subsidy schemes for the middle classes, MIG 1 & 2 on the 31st of Dec 16, those earning up to Rs. 12 lakh of annual income could avail of the housing subsidy of 4% and those with annual income levels of Rs 18 lakh could avail of subsidy levels of upto 3%

According to the rule, if a person earning Rs.18 lakh per annum approached a bank for loan, they would be able to get a loan of Rs.65 lakhs. This actually accounts for more than 55% of the stock that is traded on the property portals like Magicbricks.com. The scheme allows the borrower a subsidy up to 3% on the first 18 lakh, if the loan has been availed after the IST of January 17. Moreover, the rate of interest drops down from the existing 8.5%. Amrit Abhijat, Mission Director, PMAY and JS (HFA) says," This is the best of times to buy affordable housing in India".

While there are significant challenges with internet handling, statistics clearly shows that more than thirty lakh people have applied through HUPA website for affordable housing. Even though some states are still now encouraging applications through CLSS, there are service centres manned by the IT literates who help the applicants upon charging a minimum fee of Rs. 25. This has resulted in a massive number of people applying online without any trouble. The National Housing Bank has now determined that at least 90% lakh loan applications will be processed.

Dr P Jaipal, Sr Executive Director, HUDCO said, "For the first time, the middle income group has gotten incorporated into the affordable categories. The MIG subsidies will last only for a year. If we delay interpreting the law for a long time then, we will lose time we don’t have. The industry needs to be ready to take advantage of this wonderful scheme. Otherwise, when the scheme gets appraised next year, we won’t see success as expected".

Dr Jaipal also feels that since it is easier for the developers to make money out of the MIG sector, the higher end of the LIG segment that was being addressed by developers may be neglected. One way to tackle this is to keep a certain percentage of money to construct LIG housing.

With or without priority sector lending, banks such as SBI and HDFC are holding major sessions on CLSS for its staff. This is part of the preparation for a large number of disbursals. NHB, on its part, is now equipped to make the disbursals into the bank accounts of the borrower in two days, thanks to a massive digitising exercise that has won them an award as well.

With the introduction of digital cash movement systems, many informal sector workers have started earning CIBIL score. This actually helps the microfinance lenders such as SEWA bank to lend between 1 and 3 lakh. The ministry is discussing options with the Indian Banks Association, to lend money to unorganized sectors. In this regard, a simplified application form and document process has been circulated by the IBA. However, the banks have to take a compassionate view while lending to informal sectors as they may not have proper supporting documents.

If you are buying a house in resale markets from someone who has got a house using subsidy and is selling now that the lock-in period is over, you are eligible to be considered for funding under the subsidy scheme. But sellers do not get more subsidies.

As per consensus 2011, the PMAY was launched in 4011 statutory towns. NHB, has now mapped all the localities in these cities to postal codes that will facilitate lending by the banks.

As the Secretary Dr Nandita Chatterjee said, "The entire purpose of the scheme is for people without a single house to get one in the long run". With the introduction of schemes, the interest rates on loans have come down significantly which will definitely help people buy house. The subsidies that the government keeps announcing will aid in the process of buying affordable housing. There is a strong speculation that the incentives may not exist next year therefore, buying a housing now would be the best option.

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