Country's leading apex body for real estate sector, National Real Estate Development Council (NAREDCO) has said that the recent provisions of the Finance Bill 2017, under which the government has proposed to award infrastructure status to the affordable housing segment could change the face of the Indian market as more companies will be part of these markets in coming years.
The industry expects interest rates to witness sharp falls in capital needs similar to the home loan segment which will incentivise real estate developers to focus on affordable housing. An industry status will help developers in accessing capital (equity and debt) at lower costs.
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."
The government's announcement to build 1 crore houses for the poor by 2019 along with the allocation of Rs 23,000 crore for Pradhan Mantri Awas Yojana is expected to make "Housing for All" by 2022 a close reality.
What comes as a shot for the industry is the face that infrastructure is a priority for this government. This is reflected in this year's Budget where allocation for infrastructure is more than Rs 3,90,000 crore.
It has provided Rs 2.41 lakh crore for transport sector, including railways, road and shipping. Allocation for national highways has been increased to Rs 64,000 crore from Rs 57,676 crore.
This comes after 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 per cent interest subsidy will be available for loans up to 9 lakh and 3 per cent for loans up to 12 lakh, under the Pradhan Mantri Awas Yojana (PMAY), which will boost the need of housing for neo middle income group home buyers.
Commenting on tax incentives, 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 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.
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.