Budget 2019 to incentivize affordable housing and rental housing


The ‘Pradhan Mantri Awaas Yojana scheme-Housing for All’ aims to build 1.95 crore houses out of which 1.54 crore rural houses have been built in the last five years, as mentioned by finance minister Nirmala Sitharaman in Budget 2019 session. The budget 2019 not only aims to target the sector of affordable housing but also deals with the current archaic laws surrounding the rental housing sector. The government is yet to be clear on the laws and regulations that will boost India’s rental market, which is estimated to be around 20 billion $ as per the International Monetary Fund. The urban areas would account for $13.5 billion and rural areas would account for $0.8 billion.

Under the ‘Housing for all’ scheme, the interest deduction on a self-owned house worth up to Rs 45 lakh has increased by 1.50 lakh, where the initial amount was 2 lakh and hence now amounting Rs 3.50 lakh till March 2020. The revised changes suggest that an income up to 10 lakhs of salary would have 3.50 lakhs exempted and are also entitled to exemption of 1.50 lakh under 80 C of the Income Tax Act.PMAY scheme specifies different amounts of exemption according to the income group the family belongs to where the maximum credit linked subsidy is up to 6.5%. The GST on units priced up to Rs 45 lakhs has been brought down from 8% to 1%. 

This will help in boosting the growth in the affordable housing sector in tier-I and tier-II cities.

The overall budget suggests that the government is trying to address inefficiency in the housing market. It is trying to open land banks in order to create more capacity. It is planning to open up unused land and propose brownfield development projects.

The boost in infrastructure industry would incentivize the smart transport development that would involve the creation of rapid transport, mass transit system, wide roads, and other connectivity nodes. The 11 million vacant houses that were found locked up as per 2011 Census also could be sold as a part of the changes that would be brought to ease the stress on the affordable housing sector. Government has also mentioned that Reserve bank of India would be regulating the functioning of Housing finance companies instead of the National Housing bank so as to have better regulation and working for the investors and the stakeholders in the housing sector.

Also, RBI has been asked to frame laws to regulate non-banking finance companies(NBFC) closely henceforth to make “Housing for All” a reality by 2022.

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