Make building and buying affordable

Real estate sector is a growth driver, give it the recognition it deserves, say developers.

Extending infrastructure developer status to the real estate sector, tax benefits for enabling affordable housing, including interest subsidy, development of rental housing, and bringing down interest rates on home loans are among the major demands for the real estate sector.

URBANISATION

Mr Lalit Kumar Jain, National President, Confederation of Real Estate Developers Associations of India, said in a statement, “If urbanisation is a key aspect of economic development, then the real estate sector has to underpin the growth. Apart from being a key trigger to urban development it supports a range of construction-related industries and generates jobs.

Overall, the government needs to take a close look at promoting investments into housing, since housing is the need of the hour. The securities / shares listed on stock exchanges are tax-free, which revolutionised the investment scenario in the country, and helped in boosting growth. A similar pattern could be made applicable to the real estate industry, too. The real estate industry faces high interest cost, and faces discriminatory treatment, despite being the most productive, as it contributes 78 per cent to the GDP for every rupee invested. Inadequate financial resources make the sale components costly, and adversely impact affordability.

CREDAI is seeking a new tax scheme, like tax holiday, to generate stock under the affordable housing category. For instance, all projects with tenements below 80 square metres in Mumbai and Delhi, and 1,000 square metres in other cities, could be exempted from taxes. Such provision under the Income Tax Act has shown huge results in the scheme under Section 80I.

An interest subsidy of 7 per cent for affordable housing tenements, with a loan up to Rs 5 lakhs, would go a long way in supporting the cause.

There is also a need to promote large-scale development of rental housing — an option would be to remove restrictions on the number of units held by an individual. With this, those who could afford to acquire property could be encouraged to do so, and add to the availability of rental housing.

FINANCIAL INSTITUTIONS

Mr Srinivas Acharya, MD, Sundaram BNP Paribas Home Finance, said the Finance Minister could consider allowing Financial Institutions (FIs) to raise funds through Tax-Free Bonds for exclusively refinancing Home Loans at a low rate of interest, and allowing External Commercial Borrowings (ECBs) for Housing Finance Companies without prior approval of RBI, as we believe this will aid in the faster growth of the Housing Finance Sector.

Increasing Tax Deductibility of Home Loan Interest from the current Rs 1.50 lakhs annually to Rs 3 lakhs a year would be boon for the home buyers, and help generate demand and affordability.

The Government could consider increasing the limit for financing small homes to Rs 25 lakhs, and the cost of house to Rs 30 lakhs from the prevailing limits of Rs 15 lakhs and Rs 25lakhs, for availing the 1 per cent interest subsidy. The sector would also welcome the early enactment of a workable ‘Real Estate Regulation Bill'.

INTEREST RATES

Mr Sarang Wadhawan, Vice-Chairman & Managing Director, Housing Development & Infrastructure Ltd, said an interest rate subvention of 1 per cent for loans up to Rs 25 lakhs for residential projects would be a major support for the buyers.

Slum rehabilitation, redevelopment of old buildings, cluster developments, and plotted land developments need to be classified as urban infrastructure projects.

The Government could also consider freeing external commercial borrowings for commercial real estate projects, including townships through the automatic route of the RBI up to $500 million.

Infrastructure status for apartments less than 1,000 square feet in the residential segment, to promote low-cost housing in urban areas, will help enhance supply in this segment. An Urban Housing Development fund of Rs 10,000 crore could be constituted for refinancing the low-cost / mid-income housing, slum rehabilitation, redevelopment, cluster developments projects to be undertaken by the private sector.

Services tax for residential apartments upto Rs 50 lakhs would promote affordable housing projects. Affordable housing projects to be classified as priority sector lending from Reserve Bank of India.

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