The Honourable Prime Minister announced several exemptions and subsidies while addressing to the nation on New Year’s Eve. Prominent amongst those with a direct bearing on the real estate sector are as below:

Two new middle-income categories have been created under the Pradhan Mantri Awaas Yojana in urban areas. Under this scheme home loans of up to INR 9 lakh and INR 12 lakh, taken up in 2017 will receive an interest subvention of 4 percent and 3 percent, respectively.
Number of houses being built under the Pradhan Mantri Awas Yojna to be increased by 33 percent.

Additionally, for the neo-middle and middle class in rural areas, loans of upto INR 2 lakhs taken in 2017 for the purpose of new housing, or extension of housing in rural areas will receive an interest subvention of 3 percent.

Several other reforms were also announced to boost the agriculture sector, employment in small and medium sector enterprises, maternal and child health and safeguarding of senior citizens, which intend to benefit the commoners.

Colliers Research View

In our opinion, these announcements should help in creation of an enabling ecosystem for the poor, neo-middle and middle class citizens. These measures should enhance availability of credit for low cost housing products in smaller towns and help in bringing the “Housing for All by 2022” agenda a step closer to the reality. We foresee limited impact on Tier I cities and other metro cities due to the high price points but affordable housing sector in rural areas and Tier II and Tier III towns should get a boost. However, as the benefits seem to be limited to the loans taken in 2017, we believe the impact may not be as strong as intended and may benefit only a small segment.