Maharashtra Govt’s Property Tax Waiver to Prop up Affordable Housing Activity

Mumbai

The Maharashtra government’s decision to waive property tax on houses with an area of up to 500 sqft in Mumbai and Navi Mumbai is expected to prop up activity including demand, supply and financing of affordable houses in the country’s most expensive property market.

While state ministers have so far announced the waiver only for Mumbai and Navi Mumbai, it is likely to be extended to other cities in Maharashtra, helping boost the property markets there as well.

The move is likely to benefit not only prospective homebuyers, but also real estate developers and other stakeholders, such as banks and mortgage companies that have previously focused on the affordable housing segment.

"Given that the demand is set to increase for such apartments and help improve revenue visibility, we will also focus more on this segment. Over 40% of our product offerings are already under this threshold, and homebuyers are set to benefit from the decision," Arihant Superstructures Chairman Ashok Chhajer said.

Governments, both in the state and at the Centre, have been pushing the supply of affordable housing through various schemes and incentives for the past few years.

In 2015, the central government launched the Pradhan Mantri Awas Yojana, with a target to meet demand for 11.22 million homes. Since the launch of the policy until March 2021, 11.3 million houses have been sanctioned and 4.8 million of those completed.

"While clarity is needed on whether this waiver will be available on the basis of the carpet or built-up area of the apartment, most one-bedroom houses will be covered under this waiver and demand for those configurations will increase," said Rajesh Prajapati, Founder President of industry association CREDAI-MCHI Raigad, Navi Mumbai.

In the backdrop of expensive land prices, the city’s central localities may not witness a substantial rise in the number of launches of such compact and affordable houses, except from the government’s housing bodies.

However, the peripheral areas will continue to witness a rise in supplies.

A Knight Frank India study found that Indian residential property markets are at their decadal best in terms of housing affordability, as a decline in house prices and multi-decade-low home loan interest rates have made houses more affordable in 2021.

While Ahmedabad, Pune and Chennai have emerged as the most affordable Indian housing markets in 2021, Mumbai has turned out to be the biggest gainer in affordability since 2010.

Several schemes for affordable housing have been introduced by the government in recent years, including interest subsidies for low and economically disadvantaged sections, affordable housing being granted infrastructure status to ease fund availability, and additional tax benefits for both developers and homebuyers.

The need for affordable housing is growing across the urban sprawls of India and has caught the attention of many developers and financial institutions, who are looking to tap this growing demand.

More than half of all Indian residential launches in the top eight cities in the last five years have been in the sub-Rs 50 lakh segment.

Last year, the government of Maharashtra invited private real estate developers to partner with its housing agency, Mhada, to build affordable residential projects across the state. This model has already been explored by the state governments of Uttar Pradesh, Haryana and West Bengal.

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