What is Home Buyer’s Choice? Affordable or Premium Homes?

Building A New India, a series launched by Orientbell Tiles in association with TV9 Bharatvarsh, aims to bring together builders, thought leaders and key policymakers of the realty sector under a single forum to discuss the challenges faced by them post Covid 19.The topic of discussion for the first episode of the series was ‘Affordable Housing vs Premium Housing’. Before we get into the details of what was discussed, let us first understand what affordable housing is and how it differs from premium or mid-segment housing.

What is Affordable Housing?

According to the dictionary, affordable housing consists of “housing units that are affordable by that section of society whose income is below the median household income”. If you consider the meaning of the word under the umbrella of GST, then affordable housing will include housing units that are priced at Rs 45 lakh or less and whose carpet area does not exceed 60 metre square in metro cities, and 90 metre square in non-metros.

What is Premium Housing?

Similarly, mid-segment or premium housing includes units that either cost more than Rs 45 lakh or that are larger than 60 metre square (in metro cities) and 90 metre square (in non-metro cities).

Why has Affordable Housing Gained so much Popularity?

The massive 7 per cent drop in GST from 8 per cent to 1 per cent on affordable housing has proven to be lucrative for home buyers across the nation. No wonder there has been an increase in demand for affordable housing units.

According to Mr. Pradeep Aggarwal, chairman of Signature Global, “Affordable housing has entered this industry like a driver. You can see that affordable housing has changed the scene of the real estate industry over the past five years.”

“90% of the population is made for affordable housing,” says Mr. Aggarwal.

“Luxury segment has its own role to play, but if you take into consideration the population of the country, 90 per cent of the population of the country is made for affordable housing. This is because 34 per cent of the population wants the LIG (low-income group) and MIG (middle-income group) segment, while about 56 per cent of the population wants houses under the EWS (economically weaker section) category. So where 90 per cent or more of the population has a need for affordable housing, the future is very bright.”

The pre-Covid era (Q4 of 2019) saw affordable housing ruling the roost both in terms of sales as well as supply from the builders.

According to Mr. Aggarwal, government policies, such as the Deen Dayal Awas Yojana also have a big role to play in the popularity of affordable housing.

“Since the past two to three years, a policy named the Deen Dayal Awas Yojana has been trending. Under this scheme, the main aim of the government was to regularise the almost 3,000 unregularised colonies in Haryana where people had cut plots into parts and sold them. So, a lot of mushrooming had been created. To bust it, the Haryana government came up with the Deen Dayal Awas Yojana, under which small plots measuring 80 metre square to 150 metre square could be provided to people. Earlier, plots of this size were not available. If you see, even this policy is related to the common man, where you make a plot worth Rs 40 lakh to Rs 50 lakh available. If we talk about building floors, each floor also works out to Rs 40 lakh to Rs 50 lakh.”

Post the second wave of the pandemic, house buying shot up by almost three fold. “People have started feeling the need for bigger homes,” says Mr. Praveen Jain, CMD of Tulip Infrastructure.

Mr. Jain further explained, “Because of Covid, which has mandated work from home, people have started feeling the need for bigger homes since they want to use a room as an office. So, the people who lived in three-bedroom flats now require four bedrooms, and people who lived in two bedrooms require three bedrooms.”

Due to the lack of projects during the pandemic, the demand for premium housing has increased now, according to Mr. Jain.

“Post Covid, especially over the last two years, you will see that new projects weren’t launched much though the demand for homes was there in the market. In fact, the demand for the premium or the mid-segment increased too. The reasons for the increase in demand for homes can be attributed to the fact that the rate of interest of banks has been lowered and some states have also reduced the stamp duty on property registration.”

You can now watch the full episode of Building A New India here and listen to the industry experts talk about homeowners choice; Affordable or Premium Homes.