India’s leading apex body for real estate sector, National Real Estate Development Council (NAREDCO) has welcomed the provisions of the Finance Bill 2017, under which government has proposed to award infrastructure status to affordable housing segment.
The industry body in its submission over pre-budget expectations had demanded an infrastructure status for affordable housing sector. Commenting on the Union Budget provisions, President NAREDCO, Parveen Jain said, “The Union Budget has paved growth path for the industry and the country. While it aims to meet the overall housing target of the government, it also is a step in the right direction. NAREDCO had been demanding infrastructure status for affordable housing segment. The move will now open a plethora of opportunities for real estate development in the country. Not only will the industry be able to attract more funding, the credit off-takes will augment housing supply for both home buyers and real estate developers, thereby aligning with goals, that of the government. Notional Rental Income which was subject to tax as deemed stock in trade after receiving the Completion Certificate has been allowed a tax holiday of one year, which is a welcome move.”
In other incentives, the Pradhan Mantri Awas Yojana allocation has been raised to Rs 23,000 crore, from Rs 15,000 crore. The government has also helped the segment of affordable housing by redefining the applicability of the unit size for metros and other cities. The ‘built up area’ has been replaced by ‘carpet area’, which is 30 square metres in the four metro cities and 60 square metres in other cities. The completion period of these projects has been extended to 5 years from the commencement, which was earlier only 3 years. This will further boost affordable housing across cities.
Prime Minister Narendra Modi in his speech on the eve of new year announced additional category of subsidies for neo middle income groups in which 4% interest subsidy will be available for loans upto 9 Lacs and 3% for loans upto 12 Lacs, under the Pradhan Mantri Awas Yojana (PMAY), which will boost the need of housing for neo middle income group home buyers. Commenting on these tax incentives and the Union Budget for 2017-18, Rajeev Talwar, Chairman, NAREDCO said, “The announcement will help in reducing the costs for developers and help them attract investments into the affordable housing segment. The infrastructure status would lower the borrowing cost for the developers and will also simplify the regulations in the country to directly borrow foreign debt. As an impact, the development sector will be able to attract enough liquidity for construction of affordable housing. The provisions of the Finance Bill is just an extension of what the industry had wished for. Another announcement by the Finance Minister regarding refinancing by National Housing Bank to the tune of Rs. 20,000 Crore in 2017-18 in Affordable Housing is a big positive. In joint venture development capital gain tax was levied from the time the land owner transferred the land, without him getting any penny. This provision has been modified and now the capital gain tax will arise or be levied only in the year the project is completed.”
The aim to build 1 crore housing in urban areas by 2019 for the homeless aligns with the government’s agenda to bring 2 crore housing by 2022 under its Pradhan Mantri Awas Yojna (PMAY). A major positive by awarding infrastructure status to Affordable Housing will make availability of liquidity support from a variety of funds including institutional funding, pension funds, insurance funds and external commercial borrowings.
Naredco has pledged to continue its support in implementing the target of affordable housing in the country by suggesting more such reforms for the sector.