Infrastructure status for affordable housingGovt's new initiative expected to reduce costs for developers, also attract investors
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The government needs to define affordable housing or low-cost housing.
Aimed at boosting investment in the real estate sector, the government on Wednesday announced infrastructure status for affordable housing. “Affordable housing will now be given infrastructure status, which will enable these projects to avail the associated benefits,” Finance Minister Arun Jaitley said, presenting the general Budget. This was a long-pending demand of the sector. As the NDA government has been pushing Prime Minister Narendra Modi’s pet project of providing about 20 million houses across India by 2020, the new status is expected to reduce costs for developers and attract investors.
Now the government would need to define affordable housing or low-cost housing. The government has also to ensure that funds from these projects cannot be withdrawn before completion of the project. “The National Housing Bank will refinance individual housing loans of about Rs 20,000 crore in 2017-18. Thanks to the surplus liquidity created by demonetisation, the banks have already started reducing their lending rates, including for housing,” the minister said.
To promote affordable homes, the government also proposed to amend Section 80-IBA of Income Tax Act, relaxing the condition of period of completion of the project for claiming deduction from the current three to five years. Stating that affordable housing is one of the thrust areas of tax proposals, he said, “In my Budget proposals last year, I had announced a scheme for profit-linked Income-Tax exemption for promoters of affordable housing schemes, which has received a very good response.”
To make this scheme more attractive, Jaitley proposed certain changes. “Instead of a built-up area of 30 and 60 sqm, carpet area of 30 and 60 sqm will be calculated. Besides, the 30 sqm limit will apply only in municipal limits of four metropolitan cities, while in rest of the country, including peripheral areas of metros, 60 sqm limit will apply. In order to be eligible, the project was to be completed in three years after commencement. I propose to extend this period to five years,” the minister said.
The government also announced tax sops for builders sitting on huge unsold stock amid multi-year slowdown in the real estate sector, particularly the housing segment. “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 after the year in which the completion certificate is received so that they get some breathing time for liquidating their inventory,” Jaitley said.
Now the government would need to define affordable housing or low-cost housing. The government has also to ensure that funds from these projects cannot be withdrawn before completion of the project. “The National Housing Bank will refinance individual housing loans of about Rs 20,000 crore in 2017-18. Thanks to the surplus liquidity created by demonetisation, the banks have already started reducing their lending rates, including for housing,” the minister said.
To promote affordable homes, the government also proposed to amend Section 80-IBA of Income Tax Act, relaxing the condition of period of completion of the project for claiming deduction from the current three to five years. Stating that affordable housing is one of the thrust areas of tax proposals, he said, “In my Budget proposals last year, I had announced a scheme for profit-linked Income-Tax exemption for promoters of affordable housing schemes, which has received a very good response.”
To make this scheme more attractive, Jaitley proposed certain changes. “Instead of a built-up area of 30 and 60 sqm, carpet area of 30 and 60 sqm will be calculated. Besides, the 30 sqm limit will apply only in municipal limits of four metropolitan cities, while in rest of the country, including peripheral areas of metros, 60 sqm limit will apply. In order to be eligible, the project was to be completed in three years after commencement. I propose to extend this period to five years,” the minister said.
The government also announced tax sops for builders sitting on huge unsold stock amid multi-year slowdown in the real estate sector, particularly the housing segment. “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 after the year in which the completion certificate is received so that they get some breathing time for liquidating their inventory,” Jaitley said.