Govt might offer sops for affordable housing

Developers have demanded lower borrowing cost for the housing sector as well as reduced taxes to promote affordable housing

The Budget is expected to have incentives to the real estate sector as well as a vision for affordable housing.

Monday’s Presidential address to the joint session of Parliament focused on housing for all within 75 years of Independence — an issue highlighted in the Bharatiya Janata Party (BJP) manifesto, too.

“The government will build 100 cities focused on specialised domains and equipped with world-class amenities. By the time the nation completes 75 years of its Independence, every family will have a pucca house with water connection, toilet facilities, 24x7 electricity supply and access,” President Pranab Mukherjee said in his speech.

Bogged down by high construction costs and lower margins, developers have demanded lower borrowing cost and taxes to promote affordable housing.

According to realty experts, low profit margin is one of the reasons why developers find the sector unattractive. “Every time the market slows down, developers reduce the ticket size, lowering the prices of smaller units, while retaining the amenities that usually go with high-end projects. So it becomes affordable,” said an analyst.

Dearth of affordable homes has resulted in illegal construction and building collapses in many parts of the country. According to reports, there is a shortage of 18 million homes, both for the economically weaker section and the lower income group.

The President’s address highlighted the fact that growing urbanisation is an opportunity rather than a challenge, Urban Development Minister M Venkaiah Naidu said in a statement.

Realty developers association Credai in its recommendations to Naidu has sought lower borrowing cost for the housing sector through a mix of interest subvention for low-income borrowers and greater access to finance by developers. It has also asked for the removal of the minimum requirement of 50,000 sq m and capital requirement of $5 million for foreign direct investment in case of affordable housing, automatic external commercial borrowing and higher refinance from National Housing Bank to housing finance companies.

Housing also faces a disproportionate incidence of taxes, at 35 per cent of the cost of a completed unit. “This can be partially alleviated by giving the tax treatment of special economic zones to affordable housing projects and increasing threshold limits of deduction on interest to Rs 5 lakh on housing,” Credai noted.