Looking to boost the housing sector, the Modi government is mulling a new scheme that may use money from the demonetisation drive. According to an ET Now report, the government is keen to boost the housing sector via a new scheme and is already in discussion with the RBI. The new housing scheme may be announced as early as the Union Budget 2017, which is expected to be presented on February 1.

The channel reported that the final contours of the housing scheme will be decided after the details of revenue earned from demonetisation emerge. The report went on to add that the government is eyeing an interest rate in the range of 6-7% for home loans up to Rs 50 lakh. This new lower interest rate option of 6-7% will be available to first time borrowers and is likely to provide a much needed impetus to the housing market.

 The real estate sector has been under pressure for quite some time now, and with the government’s move to demonetise old Rs 500 and Rs 1000 notes, experts expect an initial slump in home sales. However, there are also chances that banks will find room to lower loan rates – a step that would encourage people to buy homes. ‘Housing For All’ is a dream project of the Modi government, and the new scheme that is being talked about appears to be a way to avoid demand for real estate from falling further.

The proposed interest rate range of 6-7% for home loans up to Rs 50 lakh also suggests that the government is looking to make housing more affordable for all. While rating agencies and analysts were skeptical of the impact of demonetisation on the real estate sector, some industry experts had welcomed the move, stating that it would benefit in the long-term. Nirmal Jain, Chairman of India Infoline had said that housing will no longer be a distant dream for people now.

“This (demonetisation) is a very powerful measure to curb black money. PM Modi has kept his promise of taking stern measures against black money. It will have deflationary impact in general and more specifically on real estate prices and make homes affordable, and is indirectly a boon to honest tax payers,” he had said. ref: http://tz.ucweb.com/11_1qqhY

Demonetization: 'Housing prices already at lowest, no scope for correction,' says CREDA

Credai said the real estate industry fully and unequivocally supports government's decision of demonetization.

Realtors' body CREDAI said on Saturday there is no further scope for correction in housing prices in the primary market post demonetization as rates are already ruling at the lowest level. Credai, however, said that the real estate industry fully and unequivocally supports the decision of the government to demonetise currency notes of Rs 500 and Rs 1,000 in the national endeavour to eliminate black money, corruption, fake currency and terror financing.

 The association in a statement said that the primary market is funded by banks and financial institutions which are all regulated entities. As such, cash component is not an integral element of the primary market. Therefore, Credai denies adverse impact on the primary real estate market arising out of demonetization. In fact, the primary segment is expected to gain at a rate of 15% YoY, the statement said.

The government's resolve to eliminate black money and corruption is in the interest of the common man as well as business and industry, it said. Real estate industry contributes 7% of country's GDP and is the second biggest employer after agriculture. Given the scale and size of the industry, it is imperative that Credai articulates the impact of demonetization on the industry and brings it to the knowledge of the general public, it said.

 In the aftermath of demonetization move, banks are going to have additional funds upward of Rs 10 trillion. Hence, a fall in interest rates up to 200 basis points is expected. An early sign is seen with country's largest lender State Bank of India cutting its deposit rates by 1.75%. According to Credai, we see home loan rates coming down from the present level of 9.25% to less than 7% in less than one year from now.

This would bring down the EMI for the ultimate consumers. Credai expects the mop up of black money to also lead to higher tax collection and a lower rate of personal and corporate income tax from the next financial year onwards. In other words, the demonetization would put more money into the pocket of home purchasers through lower tax burden and incentives for home ownership.

 The tendency towards lower rate of interest is also going to be strengthened by a low rate of inflation. Credai, comprising 11,500 real estate developers spread over 166 cities in 23 states in the country, is the apex body for private real estate developers in the country.
  http://www.dnaindia.com/money/report-demonetization-housing-prices-already-at-lowest-no-scope-for-correction-says-credai-2277276