It is official. The Union Budget 2010-11 has explicitly sent a message to the building sector in the country to focus more on building houses for the low-income groups.

It is an idea born out of necessity. The worldwide economic recession drew down property prices across the globe. Initially, it appeared that the property market in India, particularly in Kerala, would remain insulated from the global development. However, prices came down in India too, more significantly in some cities than in others.

For the less affluent

Under these circumstances, the idea of affordable homes caught up in the market. Housing for the less affluent and housing projects away from urban centres continue to hold the imagination of the public.

The Union Budget has just thrown its weight behind the concept and some analysts have interpreted it as an attempt to drive real property development into rural areas also where affordability is a must and housing requirements are high. The budget’s attempt is to invite the builders to the smaller towns in the country.

One of the key reasons for this view of the budget provision is the extension of the interest subvention scheme. The scheme for one per cent interest subvention for housing loans up to Rs.10 lakh, where the total cost of the house does not exceed Rs.20 lakh, was announced in the Union Budget 2009-10. In his budget speech, Union Finance Minister Pranab Mukherjee said the budget had provided Rs.700 crore for the scheme.

Consideration

It is a clear signal that housing for the poorer sections of society will get government consideration even in the future, said an official of a leading housing finance company. He said that affordable homes were a concept that had to be pushed more widely if housing requirements were to be met in the country.

However, considering it in the Kerala context, builders may not be so confident. One of the major reasons for this apprehension is the price of land, which is high almost on a uniform basis across the State, said a leading builder in Kochi.

Rural development

The increased allocation in the budget for rural development and rural housing are the other signals that moving away from urban centres will be advantageous to the builders in the long run.

The Indira Awas Yojana, a rural housing scheme for the weaker sections, has got an upward revision in allocation as the Finance Minister conceded increase in the cost of construction.

And so, the unit cost under the scheme has been raised to Rs.45,000 in the plain areas and to Rs.48,500 in the hilly terrains. The scheme has been allocated a total of Rs.10,000 crore for the financial year.

The budget reiterated that the government continued to focus on rural infrastructure development. The Finance Minister said in his budget speech: “For UPA Government, development of rural infrastructure remains a high priority area.”

The allocation for rural development is Rs.66,100 crore.

Focus

The focus on rural uplift is seen in the increased allocation of Rs.40,100 crore for the Mahatma Gandhi National Rural Employment Guarantee Scheme, which has completed four years.

The Bharat Nirman programme for upgrading rural infrastructure has received a substantial allocation of Rs.48,000 crore.

Sources in the housing finance industry predict that housing interest rates are likely to harden. Though institutions such as HUDCO are offering loans at eight per cent with a two-year fixed period, the trend is likely to change in the near future.

Private banks have already started raising rates and it is possible that their counterparts in the public sector too will take the cue, though it may not be until the July quarterly announcement from the Reserve Bank of India, sources added.

 
News Published Under:  The Hindu