The Rise of Affordable Housing: Opportunities for First-Time Homebuyers

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Last updated on 26th February 2024

In the ever-evolving landscape of the real estate market, a powerful force has emerged—the resurgence of first time homebuyers. While economic conditions, interest rates, and housing supply play crucial roles, the surge in first-time home purchases has become a defining factor in the housing market's dynamics.

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Opportunities for First-Time Homebuyers

The catalyst behind this surge is the significant cohort of Millennials who have entered their early-to-mid-30s, coinciding with the typical age range of first time homebuyers. Additionally, a growing pool of young professionals with sufficient income further fuels this trend. As first-time homebuyers reshape the housing market, their journey is not without challenges. A shortage of affordable entry-level homes and rising mortgage rates pose significant obstacles. However, the resilience of this demographic and their impact on the market cannot be overstated.
This blog will cover the key policy changes and initiatives that have made affordable housing in india more accessible and budget-friendly for individuals taking their inaugural steps into homeownership. Let's embark on this introductory first-time homebuyer tips, to understand how these developments can benefit you as a first-time homebuyer.

Suggested read: Millennial Homebuyers

The Pradhan Mantri Awas Yojana (PMAY)

The affordable housing landscape in India has seen a remarkable shift in the last few years, creating substantial opportunities for first-time homebuyers guide. As we step into 2024, it's imperative to take a closer look at the remarkable accomplishments of the Pradhan Mantri Awas Yojana (PMAY) in the affordable housing sector and set our sights on the goals for the year ahead.
Since its inception in 2015, PMAY has made significant strides towards achieving its ambitious objectives. By the end of 2022, the government had already sanctioned more than 65 lakh houses under PMAY-U, signaling substantial progress in providing housing for all. Over 35 lakh houses were in various stages of construction by the close of 2022. These homes represent a tangible commitment to fulfilling the dream of affordable housing in india for countless individuals and families across urban India.
In 2023-2024, one of the primary objectives will be to expedite the construction of the sanctioned houses. Timely completion is essential to ensure that beneficiaries can move into their new homes without unnecessary delays. The government aims to reach out to more beneficiaries and extend the benefits of PMAY to a broader section of society. This includes focusing on economically weaker sections and low-income groups, ensuring that no one is left behind in the quest for affordable housing. Also, The coming year 2024 is expected to witness innovative approaches and technology-driven solutions in the affordable housing sector. This includes exploring eco-friendly construction practices, energy-efficient designs, and the incorporation of smart technologies for enhanced living conditions.

Another crucial goal for 2024 is to facilitate easier access to financing options for first-time homebuyers. The government may introduce new schemes or modify existing ones to make home loans more affordable and accessible.

Suggested read: Pradhan Mantri Awas Yojana

Infrastructure Status and Tax Incentives

The government has been actively modifying policies and regulations, especially over the last couple of years. First-time homebuyers in India have greatly benefited from the union of infrastructure status and tax incentives. Infrastructure status allows these projects to secure funding at lower interest rates, reducing overall borrowing costs for developers, and consequently, making home loans more affordable for first-time buyers. Tax incentives, including profit exemptions for developers, the Credit Linked Subsidy Scheme (CLSS) offering interest subsidies for eligible first-time homebuyers, and streamlined Goods and Services Tax (GST) rates on under-construction properties, have further bolstered the affordability of homeownership.

This combined approach has not only expanded the supply of affordable housing but has also incentivized more individuals and families to take their first steps toward owning a home.

The Real Estate Regulatory Authority (RERA) Act

The Real Estate Regulatory Authority (RERA) Act, passed by the Parliament on 1 May 2017, is hailed as one of the most landmark legislation for India's real estate sector,  particularly in the context of low-cost housing in India. The RERA Act has emerged as a pivotal force in driving affordable housing in India. With its emphasis on transparency, accountability, and consumer protection, RERA is poised to play an even more significant role in making housing more affordable for first-time buyers.

By mandating project registration and disclosure, RERA ensures that homebuyers have access to accurate information, reducing the risk of hidden costs or project delays that could inflate prices. The Act's commitment to on-time project delivery and adherence to specified standards instills confidence in buyers, preventing unexpected financial burdens. Additionally, RERA's focus on quality construction materials and dispute resolution mechanisms safeguards the interests of homebuyers, making it a compelling choice for those seeking affordable housing options. As state governments leverage RERA to encourage affordable housing initiatives, 2024 holds promise for increased affordability and accessibility in the Indian real estate market, bringing the dream of homeownership closer to reality for first-time buyers.

Lowered GST on PMAY Projects

The Goods and Services Tax (GST) introduction in July 2017 was a significant milestone in streamlining India's taxation system. The primary objective was to create consistency, transparency, and simplicity, ultimately benefiting customers by reducing the final property price. However, even with GST in place, the total tax component, including stamp duty and registration fees, constituted a substantial 20% of the property's total value.

In January 2018, the GST Council addressed this issue by rationalizing GST rates on affordable and low-cost housing projects, bringing down the rates to 8% of the total value of under-construction properties. This reduction, a 4% decrease from the earlier effective rate of 12%, directly benefits first time homebuyer loans by reducing the overall cost of purchasing a home.

Suggested read: GST on Home Loans

In 2023, the reduced Goods and Services Tax (GST) rates on Pradhan Mantri Awas Yojana (PMAY) projects continue to be a boon for first-time homebuyers, ensuring that they enjoy a lower tax burden of 8% on the total value of under-construction properties. Looking forward to 2024, the prospects remain promising, with the government's dedication to affordable housing and potential further tax incentives suggesting that the benefits of reduced GST rates on PMAY projects will persist, providing sustained support to aspiring homebuyers in India.

FAQs about Opportunities for First-Time Homebuyers

The choice of the best loan for first-time homebuyers hinges on their financial circumstances and preferences. Common options include traditional home loans from banks and Housing Finance Companies (HFCs), which offer flexibility and competitive interest rates. Additionally, government-backed initiatives like the Pradhan Mantri Awas Yojana (PMAY) provide subsidized loans with reduced interest rates, particularly benefiting those in economically weaker sections and lower-income groups.

Benefits for first-time buyers may include down payment assistance programs, reduced interest rates, and tax credits. Under Section 80 EE of the Income Tax Act of 1961, those who use home loans to purchase their first home are eligible for tax savings of up to Rs. 50,000. A homeowner paying interest on a mortgage can deduct that amount from their gross annual income.

Affordable housing can be a solid investment, as it caters to a consistent demand for housing among a wide demographic. However, like any investment, it's essential to conduct thorough research and due diligence to make informed decisions.

In India, the Credit Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana (PMAY) provides subsidies on interest rates for home loans to eligible first-time homebuyers. The subsidy amount varies based on the beneficiary's income category.

Eligibility for affordable housing in India typically considers factors like income, family size, and location. Beneficiaries of government schemes like PMAY often fall into categories such as economically weaker sections (EWS), lower income groups (LIG), and middle-income groups (MIG).

An affordable housing loan is a specialized home loan designed to make homeownership more accessible to lower and middle-income individuals and families. These loans often come with favorable terms, reduced interest rates, and subsidies to lower the overall cost of buying a home.

Stamp duty exemption or reduction for first-time homebuyers is a policy that varies by location. Some states or regions may offer reduced stamp duty rates or exemptions to incentivize first-time buyers. It's essential to check the specific regulations in your area for accurate information.

Published on 6th December 2023