Union Finance Minister Arun Jaitley, in the Budget 2017-18, has proposed to grant ‘affordable housing’ the coveted infrastructure status to facilitate higher investment in the sector and, in turn, achieve the government’s ambitious goal of ‘Housing for All’.
The grant of infrastructure status would mean builders will be eligible for many government tax and subsidy incentives, and institutional funding at affordable rates for low cost homes.
The move has evoked mixed response from the sector. Tushad Dubash, Director, Duville Estates, said, “With the infrastructure status, the sector can look at funding through insurance companies, which is a huge alternate sector and opens up a new avenue for real estate funding.”
Issue of land cost
However, Rohit Gera, Managing Director, Gera Developments & Vice President, Confederation of Real Estate Developers’ Associations of India (Pune) said, “The infrastructure status will truly see a big impact only if these lower cost funds are actually made available for acquisition of land. Without this, a large part of the funds required for the affordable segment for the construction will be provided by the end consumer. Large scale capital is not required once the land acquisition is completed and approvals are in place.”
Pointing out that in his Budget proposals last year, he had announced a scheme for profit-linked income tax exemption for promoters of affordable housing scheme and that it had received a good response, Mr Jaitley said he intended to make this scheme more attractive.
In a bid to boost affordable housing, the Budget 2017-18 proposed to ease the condition of period of completion of the projects from current three years after commencement to five years. Besides, measurement norm of affordable housing has been amended to carpet area from built-up area — a move that will expand the area and make more projects eligible.
The Budget also proposes to modify the affordable housing scheme by stating that “instead of built up area of 30 and 60 sq.mtr., the carpet area of 30 and 60 sq.mtr. will be counted. Also the 30 sq.mtr. limit will apply only in case of municipal limits of four metropolitan cities, while for the rest of the country including in the peripheral areas of metros, limit of 60 sq.mtr. will apply.
The National Housing Bank will refinance individual housing loans of about ₹20,000 crore in 2017-18, Mr Jaitley said. He added, “Thanks to the surplus liquidity created by demonetisation, banks have already started reducing their lending rates, including those for housing. In addition, interest subvention for housing loans has also been announced by the Prime Minister.”
There are also tax sops for developers struggling with completed but unsold homes, estimated at around six lakh units in eight major cities. “At present, the houses which are unoccupied after getting completion certificates are subjected to tax on notional rental income. For builders for whom constructed buildings are stock-in-trade, I propose to apply this rule only after one year of the end of the year in which completion certificate is received so that they get some breathing time for liquidating their inventory,” Mr Jaitley said. He also proposed to make several changes in the capital gain taxation provisions in respect of land and building. “The holding period for considering gain from immovable property to be long term is three years now. This is proposed to be reduced to two years,” the Finance Minister said.
“Also, the base year for indexation is proposed to be shifted from April 1, 1981 to April 1, 2001 for all classes of assets including immovable property. This move will significantly reduce the capital gain tax liability while encouraging the mobility of assets,” he added.