In recent years, there has been an overflow of luxury housing and saturation in the high-income and mid-tier housing market. With various developers and builders focusing only on luxury homes and the prevailing misconception that affordable homes are meant only for the low-income group, the affordable housing market was stagnating.
However, with cities and metropolitans witnessing a massive influx of population and crowded housing and the government supporting the affordable homes segment with several financial initiatives and policy developments, developers are now shifting their sights to affordable housing.
Homebuyers hesitant to consider affordable housing as a real estate option can now consider affordable homes because of the lucrative benefits of investing in real estate through affordable housing. The benefits of investing in real estate through affordable housing include:
1. Quicker capital appreciation
Affordable homes have the potential to appreciate faster than luxury properties. Buyers can see an increase in their selling price within a shorter period. Buyers are also gaining more interest in affordable housing options in the outskirts because most metropolitan cities are reaching their saturation point.
The direct formula of buying at a lower price and reaping more profits is what makes affordable housing get quicker capital appreciation. This factor is also a win for the seller and developer, as much as it is for the buyer.
Compared to luxury housing, affordable housing sees lesser fluctuation in occupancy rates as not everyone can afford the former. Buyers have much more scope to renovate or upscale their affordable homes. This is because luxury homes often come with inbuilt amenities that add to the home’s total cost.
2. Easy rental cash flow
One of the best benefits of investing in affordable housing is how easy it is to make consistent rental income. Most luxury homes have periods of inconsistent rentals or low purchases from the majority of the public.
In contrast, affordable homes see consistent rental demand because they are affordable and come with base-level amenities to sustain a hassle-free life. Affordable housing is a viable option for specific categories of tenants like:
- Single living working professionals
- Disabled persons
- Retired individuals
- Live-in couples
- The elderly
- Those recovering from an illness or coming from a rehabilitation centre.
- Those wanting affordable homes, among other reasons.
Such a category of tenants could be looking for easy-to-move-in and pre-equipped affordable houses because they usually do not have the budget for a mid-tier or luxury house.
3. More support from the government
To boost investment in affordable housing, the Government has established various affordable housing policy measures by itself and with the Reserve Bank of India (RBI). These include the passing of various incentive schemes like the interest subsidy scheme under the Pradhan Mantri Awas Yojana (PMAY), the credit-linked subsidy scheme (CLSS), the Affordable Housing in Partnership (AHP) scheme, and the beneficiary-led construction or enhancement (BLC) scheme.
These schemes have resulted in a sharp rise in new housing projects in the affordable housing segment for low-income groups. The RBI also modified home loan rules to make it easier for affordable housing buyers. For instance, the RBI enabled banks to provide home loans up to 90 per cent for properties that cost up to ₹30 lakhs in October 2015 and cut the standard asset provisioning limit on housing loans to 0.25 per cent from 0.4 per cent on June 7, 2017.
The previous fiscals Union Budget tax relief with extensions of a year to repay affordable housing loans up to March 31, 2022, also helped reform affordable housing norms. All these reforms are driving the demand for affordable housing.
4. The limited scope of risk with higher resale value
Affordable housing has a limited scope of risk because of lower capital investment while purchasing affordable homes. Moreover, the government’s further initiatives of reducing stamp duty, real estate premiums, and home loan rates to 6.96 per cent also cushion the risk and loss factor, encouraging home buyers to invest in affordable housing.
Home buyers of affordable housing can also expect a higher resale value as the rising demand for buyers looking for affordable residential property on the outskirts is increasing.
Home buyers are now aware of the advantages of affordable housing and know that even a well-equipped affordable home helps save money and yields more returns than luxury homes. This is because they often come with the added factor of natural views and improved connectivity to the main areas.
The misconceptions around affordable housing dissolve once you know the benefits they can reap. Affordable housing can work both as a residential or investment option for buyers. Ultimately, affordable housing can cost you less and reap more, provided a legitimate builder or developer is building it.
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