Finance Minister Arun Jaitley gave affordable housing a push in his maiden budget last year by providing cheaper credit to the poor. The real estate industry is hoping that Budget 2015 will follow that up with some more concrete tax incentives to give affordable housing a real fillip.
According to a central government study, Indian cities faced a shortage of about 1.8 crore houses in 2012. KPMG says that number could go up to 4.4 to 4.8 crore homes by 2022. It estimates a massive investment of USD 2 trillion would be required to build these houses over the next seven years.
While the government has relaxed FDI (Foreign Direct Investment) norms for the affordable housing segment, developers say access to foreign funds alone, may not be the answer. Most players feel direct incentives are required to give the sector a real fillip.
Jerry Rao, Executive Chairman, VBHC said, “Most important incentive is to reduce stamp duties on affordable housing and I don’t think state government will agree to it unless they are reimbursed.”
Topping the wishlist are tax incentives both at the direct and the indirect tax level, current provisions do not provide any specific tax break for the affordable housing segment.
JC Sharma, VC and MD, Sobha Developers hopes the FM gives income tax benefit to the developers who build affordable homes up to 1500 sq feet without any tax liability. “He (FM) should also rationalise service tax while imposing taxation on a real estate company,” he added.
Realtors also feel that rental housing in the affordable segment should be encouraged, and one way of doing that would be to exempt the house owner's rental income from income tax.
Rao further said: “One crucial segment central government can work on is to encourage rental housing companies many people who are about to become lower middle class find it difficult to qualify for the loan, difficult to put together down payment but can pay rent if we encourage rental housing that will be great. Many states have amended rent control act, registered leases today, there is an incentive for the landlord. What the central government should do is for affordable homes, homes that are less than 60 sq mts, the rental income should be exempt from income tax. This will incentivise people to rent out homes. A lot of empty homes will come into the market and create a huge supply improvement in affordable housing'
Lack of funding, and regulatory uncertainty have been seen as two of the biggest challenges for affordable housing in the country. While an easier FDI regime may have fixed the former to some extent, industry hopes the government will take care of the latter in Budget 2015, by providing incentives to turn its "home for all" vision into reality.
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