Affordable housing: Sector may get infra tag if Realty Bill gets passed

A panel headed by the secretary of the Department of Economic Affairs constitutes the institutional mechanism for updating the master list of infrastructure sub sectors. Other members include representatives from the Reserve Bank of India, Sebi and Irda. The panel took up the matter following a case made by the Ministry of Housing and Urban Poverty Alleviation for inclusion of affordable housing in the list.

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“For the first time ever, the panel conceded that a case for infrastructure status for only affordable housing could be considered. But it also said that regulatory checks have to be in place before that so that it is not misused for construction all kinds of real estate projects,” said a government official.

Currently, the list includes 32 sub-sectors such as urban public transport, water supply pipelines, electricity distribution, capital stock in education and healthcare and even hotels with a project cost above Rs 200 crore.

The infrastructure tag would mean lower borrowing rates and tax concessions for the sector. “Currently developers have to take loans from the market at a high rate of interest in the range of 18 to 24 per cent. With an infrastructure status, borrowing rates would come down to 12 per cent. Also tax holidays that are granted to several infrastructure companies constructing highway projects etc would extend to those creating affordable housing also,” said an official. A 2012 notification of the Central Board of Direct Taxes has notified affordable housing projects, as specified business under section 35AD of Income Tax Act, 1961.

However, only expenditure of capital nature, and not on land and financial instruments, is eligible for deduction. This, according to ministry officials, is insufficient, especially in view of the fact under ‘Housing for All’ by 2022, two crore homes are to be constructed with help from private participation.