Everyone wants to buy their own home at some point in their life. But not everybody can buy it. Affordable housing is the houses or apartments available at rates that a person can easily buy either with self-financing or with funding from the bank.

The government of India wanted to provide affordable housing, housing that a person can afford with the median national income. Affordable housing is the property that a person can buy with average or median income.

The real estate market was unregulated. The government felt to put in a mechanism to help the homebuyers and property developers. The market was and is heavily skewed in favour of property developers.

With the introduction of RERA, safeguards are in place to protect the homebuyer's interests. RERA has put the owner on the property developers to a large extent.

RERA in the long term is envisioned to make the real estate segment a regulated and respected market. The government of India is taking steps to bring the regulations and their implementation to make India’s real estate market. Lucrative to foreign investors also.

Home is where the heart is

What is Affordable Housing?

Affordable housing will consist of any property that satisfies the following three conditions:

• In the case of Metropolitan Cities** :

a. The area of the property should be up to 60 square metres(m2). This is approximately 645 sq ft.

b. The agreement value of such property should not be more than ₹45 Lakhs

• In the case of Non-Metropolitan Cities:

a. The area of the property should be up to 90 square metres(m2). This is approximately 968 sq ft.

b. The agreement value of such property should not be more than ₹45 Lakhs.

** Metropolitan Cities: Delhi NCR, Mumbai, Kolkata, Bengaluru, Chennai, Hyderabad, etc.

Note: Affordable Housing defined above is derived from various sections of different Acts.

Explanation of Affordable Housing

Any property unit that measures less than 645 ft.² in a metropolitan city and bought for an amount of ₹45 lakhs or less will be considered an affordable housing unit.

In the case of non-metropolitan cities, which consists of most parts of India, any property that measures 90 m² or less i.e. 968 ft.² and bought for an amount of ₹45 lakhs or less will be considered an affordable housing unit.

GST Implication on Affordable Housing Units

If the property you buy classifies as an Affordable Housing Unit, then it will be charged 1% GST on the Agreement Value. In case of Non-Affordable housing units, the GST levied is 5% on the Agreement Value.

The difference in the tax rate can become a deal maker or deal beraker for you when purchasing your property.

Examples of Affordable & Non-Affordable Housing Units

Let us give you an example of an affordable housing unit.

Mr. Kumar, who lives in Thane district buys 1BHK in Thane for an amount of ₹40 Lakhs. The 1BHK measures 450 ft.². This property will be considered an affordable housing unit since it satisfies all the 3 conditions.

If in the above case, the value was more than ₹45 Lakhs then this property would not have been considered as an affordable housing unit.

Another example that we can share is of Mr Khan living in Jaipur. He buys a 3BHK of 1200 ft.² carpet area for ₹30,00,00 rupees. Since the carpet area is more than 968 ft.² or 90 m² and the property is in a non-metropolitan city this property will not fall into an affordable housing unit.

Who is eligible for Affordable Housing?

As per RERA, there are no conditions that need to be fulfilled to buy an affordable housing unit. It should be noted though that financial institutions or other acts related to real estate might have the respective conditions to be fulfilled.

Anyone who can afford to buy a property through any financing method can buy an affordable housing unit. But if you opt for subsidies, government schemes or linked housing loans then there are a set of conditions to be fulfilled.

Affordable Home Calculator

An Affordable Home Calculator helps you identify if the property you intend to buy classsifies as an Affordable Housing or not.

You can try out our Affordable House Calculator to know if the property you want to buy is an affordable housing unit or not.

Types of Affordable Housing Projects

There are different types of affordable housing projects available in India. These are classified as per the intention and cost of the projects.

1. Low-cost Housing:

Low-cost housing in India is not new. It is usually built by private developers or non-profit organizations. These housing units are priced at lower rates than the market rates. The idea behind these projects is to make housing accessible for low-income families.

2. Subsidized Housing:

When a housing unit is bought through subsidies or grants offered by the government in India these units are termed as subsidized housing. Government programs offer financial assistance for renting or buying a house. Any person fulfilling the conditions of the programs can take advantage of these subsidies. These subsidies can be in the form of rent or interest subsidies on home loans to eligible people.

3. Government-funded Housing:

The Government of India (GoI) has launched several initiatives from time to time for housing needs. These initiatives aim to provide low-cost housing to low and middle-income households.

Benefits of Affordable Housing

Some of the benefits of affordable housing projects are listed below:

1. Addressing Housing Shortages

One of the main reasons to develop affordable housing is to address the shortages of housing. The government wants to bridge the gap between homeowners and renters by providing them with affordable housing.

With low-cost housing, the government aims that each family whether big or small belonging to the lowest part of the society can own a roof over their head.

2. Socio-Economic Impact

Affordable housing also has a socio-economic impact on the society. Living on rent is not a vice, but paying the rent is recurring. Also shifting homes every year is a task.

Anyone, when given an option to either rent or buy their home, would prefer to buy. When people have their home instead, they will be at peace mentally.

Also, the building of affordable housing units encourages employment & investments at the same time. People from the lowest strata of society, especially the labour class get employment. On the other hand, people with capital can invest in building housing units and gain returns.

3. Government Incentives

As mentioned above, the Government of India has launched incentives and initiatives from time to time. These initiatives are in the form of housing programs, subsidies, tax breaks, and also finance.

Different government schemes such as Pradhan Mantri Awas Yojana and Rajiv Awas Yojna are great for the lower income class.

Also, the tax breaks given in the Income Tax Act, act as a push for buying a home or any property on loan from financial institutions. The tax breaks have been a favourite among the middle class helping them own their real estate.

Conclusion

Affordable housing is a concept that needs to be taken forward. It is beneficial from microeconomics and macroeconomics point of view. Both the population and the economy tend to benefit from the construction and sale of affordable housing.

India has been instrumental in taking forward the concept of affordable housing to the masses, giving them access as well as benefits to owning a home of their own.