How cost-effective is housing in India?
2022 is over, and we have entered the new year. But there is still more to be done to meet the government’s Housing-for-All aim, which had a real deadline of March 2020. Even though the Center has already increased the duration of the city and rural PMAY additions by every other year, much more may still be needed to ultimately achieve the task target. According to a United Nations report, the United States is on track to surpass China as the most populated country in the world by 2023, making it difficult to provide every resident with affordable housing that satisfies all of their needs.
In the meantime, the government continues to demonstrate its commitment to the cause by allocating Rs. 48,000 crores for the PMAY in the Budget 2022-2023, which is a 75% increase over the Rs. 27,500 crore financial allocation from the previous year. But even after the epidemic, housing continues to be more expensive because of pricing pressure. This is taken into account immediately through an increase in asset prices year over year and indirectly through a rise in home mortgage interest rates.
Although accurate data points to a more restrained increase in fees, the value of common assets has increased more dramatically than anticipated. According to unofficial estimates, housing costs have increased by double digits in some of India’s megacities during the past year. The level of firming up of fees in Tier-II and Tier-III, which are currently experiencing the majority of movement due to the introduction of the long-distance running culture, is significantly higher. No solution is in sight as far as price moderation shortly, as geopolitical uncertainty continues to drive the costs of production materials upward.
Even while the domestic economy seems far more robust than other sizable economies across the world, the potential for a ripple effect is already apparent. The job market in India hasn’t always been unaffected by the major firing sprees that a few global education titans, like Twitter and Meta, have already started. The present increase in home mortgage interest rates won’t bode well for the government’s ambitious objective of providing housing for everyone in a nation where a substantial portion of the population depends on government subsidies and housing financing to be able to purchase their first home.
Remember that the RBI has offered the repo price at 5.90% despite many increases in the past. As a result, most banks are currently offering domestic loans at interest rates of above 8% per year. This is a stark contrast to the hobby pricing that was accepted before May 2022, when many financial institutions offered loans at hobby rates under 7% annually.
Despite the accurate definition of the term, housing in India is rapidly becoming out of reach for a significant portion of the population due to rising asset acquisition costs and declining purchasing power. While external factors are still beyond the control of the government, encouraging this very important segment is necessary for a welfare state where economic growth is meaningless if only one segment of society advances (the number of high-net-worth individuals in India is on the rise, according to facts), while the other struggles to meet the most basic needs of food and shelter.
As India prepares to overtake China as the third-largest economy by the year 2027, it also becomes crucial for this developing nation to control the spread of slums by putting a stop to disorganized real estate development, unplanned expansion, and transportation. Extension of subsidies and cost-saving measures may be crucial to provide the low-cost housing sector a boost by the year 2023, in addition to encouraging low-cost housing projects from the perspective of developers.
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