Union Budget's PMAY allocation may not help private sector: Experts

Despite a longstanding request from the real estate industry, the Union Budget made no mention of increasing the Rs 1.5 lakh tax rebate on home loan interest per annum.

Instead, finance minister Nirmala Sitharaman chose to set aside Rs 48,000 crore towards the ‘PM Awas Yojana' (PMAY), to help build 80 lakh new low-cost homes. The industry is miffed, as the allocation is not likely to benefit the middle-class homebuyer in any manner.

"That (tax rebate) is something that could have gone a long way to make buying real estate for people like you and me much more affordable, and incentivize it," said Gulam Zia, senior executive director, Knight Frank India.

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"If there had been tax sops given to homebuyers, it would have really boosted housing demand," said Dhaval Ajmera, director, Ajmera Realty & Infra.

Why developers aren’t exactly thrilled with the government’s affordable housing allocation is because the private sector’s exposure to such projects is limited. Moreover, these developers say low-cost housing projects come with a large cost component, not to mention near-negligible margins.

However, real estate consultancy firm Knight Frank India tells CNBC-TV18 that the absence of incentives to middle-income homebuyers could see homes below Rs 45 lakh dominate residential sales in 2022.

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"I would say that at least 50 to 60 percent of sales (in 2022) would happen in affordable housing, because leaving aside urban areas, Mumbai, Delhi and Bengaluru are largely catered to by the PMAY structure,” said Zia.

While some analysts believe the New Year could see affordable housing sales hit new highs, given the union budget's PMAY allocation, others point out that the lukewarm consumer response to low-cost housing in 2021 only means the rise will not be automatic. Developers, they say will have to do more to promote the absorption of affordable housing units.

One of these measures could be to actively move inventories to tier-2 towns, and then get aggressive with pricing. “We have three affordable housing projects in Shahapur, Badlapur and Kalyan totalling about 10,000 apartments,” said Rohit Poddar, managing director at Poddar Housing.

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"We've launched Badlapur and Kalyan (projects) already, and we will launch Shahapur around Gudi Padwa," Poddar added, "These homes are in the 10-to-55-lakh-rupee category."

Affordable housing aside, there are indications across the board that the year could see Indian real estate continue its decent run. However, developers will keep a close eye on supply in order to ensure they do not contend with a problem of plenty. "I wish we could surpass 2021 (sales) levels, but with the kind of launches that will come, the year will be on par or a little better than 2021," said Ajmera.