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Budget 2024: Are We Likely to Get Interest Subsidies in Urban Housing? | #BudgetSimpleHai

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There’s talk that the upcoming budget might bring back interest subsidies to make urban housing more affordable. Let's dive into the details with insights from Bajaj Broking, because here, #BudgetSimpleHai.

Focus on Affordable Housing and Potential Benefits for Homebuyers

There are expectations that this year's budget could heavily focus on affordable housing. New schemes might be introduced, and there’s hope for rationalization of taxes and additional funding for existing schemes like the Special Window for Affordable and Mid-Income Housing (SWAMIH). In the February interim budget, the government allocated ₹80,671 crore to the Pradhan Mantri Awas Yojana (PMAY).

If the government reintroduces the credit-linked subsidy scheme (CLSS) like PMAY, it could significantly reduce home loan EMIs, making your dream home more affordable. This scheme offers interest subsidies across different income categories:

  • Economically Weaker Section (EWS) and Low-Income Group (LIG): Eligible for an interest rate subsidy of 6.5% on home loans up to ₹6 lakh.
  • Middle-Income Group (MIG-I and MIG-II): Subsidies of 4% and 3% on loan amounts of ₹6-12 lakh and ₹12-18 lakh, respectively.

Real Estate Sector Expectations and Recent Developments

Real estate developers are pushing for several key measures in the upcoming Union Budget to boost the sector’s growth. They seek rationalization of taxes, additional funding for affordable housing schemes, and continued government support to stimulate demand and sustain industry momentum.

In the interim budget, Finance Minister Nirmala Sitharaman pledged support for constructing an additional 20 million homes over the next five years under PMAY-Gramin. The government may introduce interest subvention for its middle-class housing scheme, with state-run Housing and Urban Development Corporation (HUDCO) as one of the nodal agencies. This could mean significant savings for middle-income homebuyers.

Key Details of the CLSS Scheme and Impact on Urban Housing

The CLSS scheme offers interest subvention across three categories: EWS, LIG, and MIG. For EWS/LIG, beneficiaries are eligible for a 6.5% interest subsidy on loans up to ₹6 lakh. For MIG, the subsidies are lower at 4% and 3%, respectively. Discussions are ongoing to determine the extent of the subsidy and the definition of the middle class for this scheme.

The reintroduction of interest subsidies could make urban housing more accessible and affordable. Over 8 million houses have been constructed under PMAY-U so far, out of the 11.8 million sanctioned. The Centre has released ₹1.6 lakh crore out of the ₹2 lakh crore committed under the scheme. The outlay for PMAY-U in the interim budget was 18% higher than FY24’s revised estimates, reflecting the government’s commitment to affordable housing.

Housing Market Trends

Housing prices in 10 cities tracked by the RBI’s house price index were up 4.1% in the fourth quarter of FY24. Cities like Ahmedabad witnessed a double-digit increase during this period. The first Cabinet meeting of the Modi 3.0 government approved assistance to construct 30 million additional houses under PMAY-Urban and PMAY-Rural.

Conclusion

With the upcoming Union Budget, the government is expected to focus on making urban housing more affordable through interest subsidies and increased funding for housing schemes. This move could empower the neo-middle class in urban areas, boost labour-intensive construction activities, and create jobs.

Stay tuned to our website for more updates because with Bajaj Broking, #BudgetSimpleHai!

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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