Credit-Linked Subsidy Scheme For Middle-Income Groups Extended Till March 2021

The government will extend the credit-linked subsidy scheme for middle-income families till March 2021 to revive demand in the housing sector.

This will stimulate demand for steel, cement, transport and other construction materials and will have immediate impact on the demand side and lead to an investment of Rs 70,000 crore, Finance Minister Nirmala Sitharaman said today while announcing the details of the second tranche of the Covid-19 economic package.

The scheme will also help create jobs, Sitharaman said. Operationalised from May 2017, the scheme was earlier extended till March 31, 2020. “The schemes has benefited 3.3 lakh middle-class families so far and more than 2.5 lakh middle-income families will benefit during 2020-21.”

The real estate sector has been facing a liquidity crunch since payment defaults by IL&FS Group companies in 2018, leading to a pile-up of unsold apartments. That, coupled with an economic slowdown, stalled a nascent recovery in the sector from the disruption caused by Prime Minister Narendra Modi’s cash ban and a stricter housing law. The finance minister announced the creation of a fund last year to finance stalled housing projects.

Under the scheme, the government offers interest subsidy to eligible beneficiaries. The scheme covers two middle-income segments—MIG-I, with annual income between Rs 6-12 lakh, and MIG-II, for families earning between Rs 12-18 lakh per annum.

Pankaj Kapoor, managing director of the real estate consultancy Liases Foras, said the measure may not be enough to boost demand. “Developers in large cities, where real estate is largely stuck, have no reprieve from the current measures,” he said. “I don’t think continuation of ongoing benefits are enough to provide a boost in demand which is diminishing due to job insecurity.”

Anuj Puri, chairman at Anarock Property Consultants, however, said the extension will help push demand for affordable housing. “As per Anarock research, there are currently 15.62 lakh under construction units across the top 7 cities, of which nearly 39 percent are in the affordable segment priced less than Rs 40 lakh.”

Dhruv Agarwala, group chief executive officer of Housing.com, Makaan.com and PropTiger.com, agreed. He said extension of the subsidy scheme will prompt many fence-sitters to buy homes soon, stimulating demand for affordable housing, helping the industry reduce unsold inventory across the country.

“This will also help sustain employment as real estate supports close to 200 allied industries,” Agarwala said. “The proposed affordable rental housing under PPP (public-private partnership) is a welcome step. This will help in effectively tackling any issues migrant labourers face in the future.”

Also Read: Covid-19 Economic Package: Real Estate Projects Under RERA To Get Six-Month Extension

Shishir Baijal, chairman and managing director of Knight Frank India, while saying that the announcement will boost affordable housing, said that for housing demand to revive, “the economy must start growing at a stable rate providing individuals financial security”. “Thus, to assess the overall impact on the real estate sector, we await finance minister’s future announcements, including for infrastructure and other steps for demand augmentation,” he said.