There was a time, not long ago, that we would look at advertisements and billboards that sported a beautiful House or apartment which shouted out slogans like “Affordable houses!” and our dreams and wishes would soar up like hot air balloons… and then we’d read the next line “Starting at Rs. X.Y crore only!” That was our hot air balloons being pricked with the pin of reality and we’d come crashing down to earth! “Really? Rs X.Y CRORE ONLY??? How easy it is to write that number and then add ‘’Crore’’ to the cake and the “ONLY” serving up as the icing!!!!” We all know this rueful feeling only too well!
But as the lyrics of an old song go “The times they are a changing”, change they did! With the new government policies and rules coming into force and the Prime Minister’s plan to provide housing to all by the year 2022 – the ‘low-cost housing’ segment is seeing growth in leaps and bounds!
What led to the booming emergence of the low-cost housing segment though? Perhaps it can be concluded that the global economic slow-down of 2008-2009 is partly responsible for this boom – the exorbitantly priced Luxury flats in Chennai, condominiums and apartments lost their sheen due to the recession. This sharp downfall in demand and the emergence of new players in the real estate arena induced developers to look at the low-cost housing segment which catered to a much larger audience as well as diversified the risks involved. A sort of win-win for all!
The scenario today
Although there is still a considerable gap in the demand and supply of Budget flats Chennai, the good news is that well known names have entered this space and the future for youngsters and middle aged people who are looking for truly affordable houses looks very bright!
But what really makes this segment so special?
With rapid urbanisation and rising population, land is becoming more and more scarce in urban India and land in central locations are being used inefficiently. This situation forces developers and realtors to shift their focus to develop low-cost projects at ‘leapfrogged locations’ (Leapfrogging refers to development in far-flung locations before closer locations are developed, the outskirts of a town for example.) Such land is available at low costs, which invariably means constructions costs come down by almost 50% – 60%!
The cut-down in construction costs definitely does not mean that the developers will take it for granted and push off sub-standard quality material on to you (the norms and rules governing builders and construction practices are quite stringent now)… It only means that you will be the owner of a beautifully constructed house at a much lesser price than the ‘premium locations’!
Consider this point as an example – If you and your spouse or siblings were to buy two or more low-cost houses on the ‘outskirts’ of the city and considering the fact that rapid urbanisation will catch up sooner than later, the houses that you bought for 8-9 lakhs will some day soar up to crores!
Here are a few more advantages that may tempt you!
The recent Union Budget supports the ‘housing for all’ programme and has declared deduction of an additional interest of Rs 50,000 per annum for first time home buyers. A person purchasing a house in India is entitled to avail tax incentives for both the interest and principal components of home loan repayments.
Till now, the interest that is paid for a self occupied house is subject to a maximum deduction of Rs 2 lakh under the category ‘Income from House Property’. But now, with the additional Rs 50,000, the deduction benefit for the interest goes up to Rs 2, 50,000, which will help you save a good amount every year.
Another positive push for affordable housing, from the supply perspective, came in the form of 100% deduction on profits for developers that provide homes up to 30 sq metres in the four metro cities, and up to 60 sq metres in other cities!
Considering all this, it’s only prudent to think of this as a joint venture with your spouse! An upper middle class family can now consider investing in a property worth a crore, because of this provision. So say, you are both first time buyers, then you can each separately claim Rs 50,000 tax benefit for a total loan sum of up to Rs 70 lakhs (each of whose loans can be Rs 35 lakhs) Repayment will have to be paid from your joint account.
Now that’s what we call smart investing for smart investors!