The government’s move to hike the carpet area of homes eligible for interest subsidy under the Pradhan Mantri Awas Yojna (PMAY) for the middle-income group (MIG) will give a much needed push to home sales, especially in tier II and III cities, say experts.
The ministry of housing and urban affairs yesterday increased the carpet area of houses eligible for benefits under PMAY’s credit linked subsidy scheme (CLSS) to 160 square meter (sqmt) for MIG-I and 200 sqmt for MIG-II, effective January 1, 2017.
The carpet areas were earlier fixed at 120 sqmt for MIG-I and 150 sq meter for MIG-II.
“This move will have a significant impact on home sales in tier II and III cities where the land costs and therefore, capital values of properties are low and larger apartments are within the reach of such buyers,” said Anuj Puri, chairman, Anarock Property Consultants.
Niranjan Hiranandani, national president of builders’ body Naredco, said the positive impact will be felt in peripheral areas of metro cities, along with smaller cities.
“The impact will be in form of enhanced economic activity and will result in improved demand, which in turn will give a boost to construction activity,” he said.
People with annual income from Rs 6 lakh to Rs 12 lakh would qualify for MIG I, while with income above Rs 12 lakh and up to Rs 18 lakh will come under MIG II. Interest subsidy for MIG I and II will be 4 per cent and 3 per cent, respectively, for a maximum tenure of 20 years.
Home loans to be eligible for subsidy would be Rs 9 lakh and 12 lakh for MIG I and MIG II, respectively, while loans beyond this will be at non-subsidised rates.
CBRE chairman, India and South East Asia, Anshuman Magazine, said this move will support momentum in the housing market as it will allow a large proportion of housing, particularly in tier-I cities, to be covered under the scheme.
This is the second such increase in carpet area in less than a year, after the government last November hiked the same to 120 sqmt for MIG-I and 150 sqmt for MIG II, from 90 and 110, respectively, earlier.
Colliers International India senior director (head consulting) Aashish Agarwal said the lower interest outflow would encourage people living in rented apartments to consider buying homes, and provide much needed sales momentum.
Giving boost to the affordable housing segment, the Reserve Bank of India (RBI) earlier this month had raised the home loan limits under priority sector lending (PSL) from Rs 28 lakh to Rs 35 lakh in metros, and from Rs 20 lakh to Rs 25 lakh in other centres.
DHFL joint managing director and chief executive Harshil Mehta feels the recent move, coupled with hike in the home loan limits, will broaden the home ownership opportunity for eligible, first home buyers.
“The announcement is expected to revive the sector where a large number of inventories have piled up, especially in tier II and III cities,” said Rahul Shah, chief executive, Sumer group.
Echoing similar views, Spenta Corporation managing director Farshid Cooper opined the move will incentivise more people in tier II and III towns to purchase larger homes, while still being able avail of the interest benefits available under PMAY.
“Over time, this decision will result in increased demand in these towns,” he added.