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Thursday, March 04, 2021

To spur growth & jobs, booster for construction and low-cost housing

One factor behind the exodus of migrants from cities during the pandemic was their lack of access to safe, affordable housing in urban clusters.

Written by Sunny Verma , Sandeep Singh | New Delhi |
Updated: January 18, 2021 7:41:13 am
As per the memorandum, the price of cement (50 kg) in the last two years from January 2019 to December 2020 has increased from Rs 360 to Rs 430, whereas steel price (per tonne) has increased from Rs 40,000 to Rs 58,000 in the same period. (Representational)

The upcoming Budget is expected to give a special focus to construction development and affordable housing as increased activity in these areas provide a higher boost to overall demand in the economy because of their forward and backward linkages.

Sources said the government plans further liberalisation of foreign direct investment (FDI) regulations for the construction development sector while a higher allocation is expected towards a credit-linked subsidy scheme for affordable housing.

One factor behind the exodus of migrants from cities during the pandemic was their lack of access to safe, affordable housing in urban clusters.

Significantly, as part of the pandemic slowdown stimulus, several state governments provided various concessions in stamp duty and other charges to kickstart transaction activity in the construction and real estate sector. The Centre, too, set up a fund to provide last-mile funding to stressed housing projects across the country.

Revival of construction development sector is also seen as crucial for employment creation.

“While 100 per cent FDI is already permitted in construction development sector, certain legal structures such as LLP are not allowed to receive foreign investment in this sector. We have discussed these and other rules where there is a scope for liberalisation,” said a source.

Barring real estate business and farm-house construction, the FDI regime is quite liberal for the construction development sector including that for township development and residential premises. Last November, the government had announced steps to promote housing sector.

The finance ministry allowed developers to sell their housing units at 20 per cent lower than the circle rate on account of price reduction in the market. The government allowed increase in the differential from 10 per cent to 20 per cent (under Section 43CA) for the period from the date of the announcement to June 30, 2021. The benefit is available on primary sale of residential units with a price value of up to Rs 2 crore.

In its proposal to the Government, industry body CII has called for a special focus on low-cost housing and an extension of the interest subvention scheme so that it can cover total housing cost of up to Rs 35 lakh.

There has also been demand to raise allocation under Pradhan Mantri Awas Yojana (PMAY) from the Rs 27,500 crore allocated in the Union Budget 2020-21 to ensure every Indian has a home in the near future.

“To provide relief to stressed homebuyers, funds could also be set aside for the National Building Construction Corporation to complete stalled projects which have been stuck due to fund shortage. This would boost consumer sentiment and rev up the demand cycle. There could be a provision to recover the costs involved once the project is completed,” said CII in its proposal.

The industry body has also called for increase in the rebate on housing loan to help boost demand for housing and push construction activity.

While the rebate of interest paid on housing loan (for self-use) has not been revised since 2014 when it was raised to Rs 2 lakh from Rs 1.5 lakh, CII has called for an upward revision given the rise in the capital value of houses.

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