Boosting Affordable Housing in Mumbai's Outskirts
Permitting external commercial borrowings (ECBs) in the low-cost housing sector is anticipated to significantly increase the availability of affordable housing projects in Mumbai's peripheral areas such as Karjat, Boisar, Nalasopara, Virar, and Dombivili. This surge in supply will be driven by the enhanced liquidity available for budget home projects.
Interest Subvention and Housing Loan Impact
The government's decision to extend the 1% interest subvention scheme on housing loans up to Rs 15 lakh (for houses costing no more than Rs 25 lakh) for an additional year will contribute to sustained demand for affordable housing in Mumbai. This extension will provide continued support to eligible homebuyers.
Infrastructure Development and Price Stability
Increased allocation towards highways and other infrastructure projects is expected to bolster the development of Mumbai's outskirts. This will lead to a rise in the number of housing units available in these areas. As a result, greater price stability and long-term affordability are predicted. The proposed increase in the investment-linked deduction of capital expenditure in affordable housing, from 100% to 150%, further incentivizes the development of more low-cost housing options within the city.
Impact of Reduced Withholding Tax and Credit Guarantee
The reduction of the withholding tax on ECB interest from 20% to 5% is set to benefit Mumbai’s affordable housing segment. This reduction will inject much-needed liquidity into the market for budget home developers, ultimately making more funds accessible for these important projects. Additionally, end users will have greater access to funds for home loans due to the establishment of a credit guarantee trust fund, which is designed to encourage the steady flow of institutional credit specifically designated for housing loans. This fund will aim to guarantee improved access to financing for potential homeowners.
Delhi-Mumbai Industrial Corridor and Land Values
The announcement of central government assistance and the ensured participation of Japan in the Delhi-Mumbai Industrial Corridor project presents a significant advantage. Areas on the periphery of Mumbai that lie along the corridor are projected to experience increases in land values, potentially spurring further real-estate development.
Venture Capital Funds and Investor Confidence
By strengthening the tax pass-through status for all types of Venture Capital Funds (VCFs), renewed confidence is expected among real estate private equity investors. This reinforced confidence is anticipated to translate into increased investments within cities like Mumbai, which has attracted a substantial portion of private equity investments following the Global Financial Crisis. This reaffirms Mumbai's position as an attractive investment hub.