Despite being carved as an objective back in 2007, the scheme of affordable housing loan gained no momentum until June 2015 with the introduction of the Pradhan Mantri Awas Yojana or PMAY. Together, the Central government and the RBI have taken countless measures to encourage investment in this area over the past few years and the sector even witnessed significant growth between 2016 and 2017; however, 2020 had a surprise that has hampered the pace at which the scheme could have otherwise grown.
COVID-19 pandemic: A disruption
2020 has shaken the very foundations of India’s economy. While the country is gradually peeking its head over the waters of recession and the healthcare sector still struggles to offer proper care to the unfortunate victims of the pandemic, the real estate market has equally suffered a severe blow.
While speculations still continue as to a definitive cause for lack of investment in the affordable housing sector, few possible reasons could be – an absence of government incentives, ambiguous economic conditions that have impacted employment, lack of credit availability due to a liquidity crisis, as well as the millennial mind-set of choosing rent over home purchase, a resolve that the pandemic has only helped strengthen.
That’s not all – the costs of inputs such as steel and cement have significantly risen post-lockdowns while simultaneously, the availability of labour has seen a steep decline. As a result, developer cash flows have taken a hit, and since banks have tightened loan norms in light of the economic condition, it’s becoming harder to avail credit.
Developers are finding it extremely difficult to complete real estate projects. And since a significant section of the society could benefit from home loans via PMAY scheme, such conditions may severely impact the supply of affordable home projects, thereby, putting the real estate market at a great loss.
The process of recovery
Ever since its emergence, the affordable housing scheme has been playing a huge role in sustaining and propelling the real estate market. Thankfully, despite taking a big hit during these uncertain times of the COVID-19 pandemic, this sector can be among the first ones to spring back to normalcy once the economy has reasonably recovered.
The extension of the PMAY scheme to the 31st of March, 2021, could also act as an excellent incentive to encourage people to invest in homeownership, especially for the MIG or Middle Income Groups. The RBI's policy rate cut can also play a significant role in this area. On the other hand, the Real Estate Regulatory Authority (RERA)'s deadline extension for completion of developer projects can give this community a further boost to continue building properties.
Finally, since the wake of the pandemic greatly encouraged the incidence of reverse migration, the result could be a high demand for affordable housing in Tier-II and Tier-III cities.
On the whole, since this segment can recover faster, it is what can sustain and support the real estate market during these trying times. Those still interested in owning a home via this government scheme can easily do so after checking their home loan eligibility for the same.