Affordable Housing: Announcements in Budget give low-income segment a leg-up

A new Credit-Linked Subsidy Scheme with a provision of `1,000 cr, extension of loan tenure and increased allocation for PMAY boost for sector

Written by Anuj Puri | Published: February 4, 2017 2:24 am
Union Budget, Affordable housing, income tax, Pradhan Mantri Awas Yojana, Kachacha house, FDI, India news, Indian Express Allocation to PMAY has been increased from Rs 15,000 crore to Rs 23,000 crore in the rural areas — and affordable housing will now finally be given infrastructure status.

In the Budget that was being touted as a make-or-break one for the future of India, the government made some big announcements on the infrastructure front and also some beneficial changes to the affordable housing segment.

The Budget missed out on giving any additional income tax incentives to first-time home buyers or providing higher tax savings on housing loans and house insurance premiums. Nor did it raise house rent deduction limits. However, it did provide some direct tax relaxation to the lowest income earners, and gave some clarity on the designated beneficiaries under the Pradhan Mantri Awas Yojana (PMAY). A new Credit-Linked Subsidy Scheme (CLSS) for the middle-income group with a provision of Rs 1,000 crore in 2017-18 was announced. Also, extension of tenure of loans under the CLSS of PMAY was increased to 20 years, from the existing 15 years.

Moreover, one crore houses are to be built by 2019 in rural India for the homeless and those living in ‘kachcha’ houses. Allocation to PMAY has been increased from Rs 15,000 crore to Rs 23,000 crore in the rural areas — and affordable housing will now finally be given infrastructure status. This is very significant, because it will provide the vital budget housing segment with cheaper sources of finance including, but not restricted to, external commercial borrowings (ECBs). Also, re-financing of housing loans by National Housing Bank (NHBs) can give a leg-up to the sector.

Under the latest provisions, developers to get a one-year time to pay tax on notional rental income on completed unsold residential inventory. The time limit for capital gains to be considered as a long-term gain has been reduced to two years, from the earlier three years. More supply will enter the housing market now.

pplicable exemptions for affordable housing will now be recognised on the basis of carpet area of 30 square metres (sq m) and 60 sq m instead of on the basis of saleable area. The 30-sq m limit will only be applicable within the corporation limits of the four major metros. For fringe areas of these metros and all other cities, it will be 60 sq m on carpet area. This will effectively serve to increase the increase the number of projects falling under this segment.

Promoters of affordable housing projects will benefit from the following announcements:

> Instead of the earlier timeline of completing their projects within three years, they now have a cushion of two additional years.
> JDs liability to pay capital gains tax will be in a year after the project is constructed. This will be beneficial for land owners and land prices can ease; this benefit can be passed on to home buyers.

On the infrastructure front, a total investment of Rs 3,96,135 crore was announced in the Budget 2017. Budget allocation for highways will go up to Rs 64,000 crore in FY18 from the earlier Rs 57,676 crore. Allocation for national highways has been stepped up to Rs 64,000 crore from Rs 57,676 crore. The rural roads’ construction work will be accelerated to 133 km of roads per day in 2016-17, as against 73 km per day during 2011-14. A new metro rail policy will be announced.

On the foreign direct investment (FDI) front, the Foreign Investment Promotion Board is set to be abolished and a new road map is to be announced in the next few months. This will give the real estate sector access to significantly more funding than it has today. A new FDI policy is under consideration, which promises to liberalise the FDI regime further.

(The writer is chairman & country head, JLL India)

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