Targetting a slum-free India by 2022, the Centre is finalising fiscal incentives for affordable housing and slum rehousing projects, including granting infrastructure status for their construction.
This means the industry will be able to access central funding through viability gap funding, or VGF, from financial institutions on priority basis and avail direct and indirect tax benefits that can be passed on to the end-user.
These measures are part of the NDA’s Sardar Patel Housing for All Mission, which is currently being given the finishing touches following a review by Prime Minister Narendra Modi on Wednesday.
Other fiscal incentives in the works are service tax exemption for all affordable housing projects, earmarking of 3 per cent credit for loans up to Rs 15 lakh to the urban poor and raising the standard deduction for rental income from 30 per cent to 40 per cent.
Another proposal is to allow reinvestment of capital gains from the sale of a single house into multiple dwelling units under Section 54 of the Income Tax Act, which deals with capital gains. Sops are proposed for lending institutions, too. There could also be concessional import duty on innovative technology for low cost housing. Simultaneously, there will also be a push for institutional finance for home-buyers.
The Ministry of Housing and Urban Poverty Alleviation (MHUPA) estimates the total cost of the mission at Rs 12 lakh crore (at the rate of Rs 6 lakh per home), with the Centre’s estimated support in the range of Rs 2 lakh crore.
However, while the previous UPA government’s flagship programme on affordable housing — the Rajiv Awas Yojana — had been lauded for doing away with the concept of “cut-off date” for deciding the eligibility of slum-dwellers, the NDA has proposed to reintroduce the concept, permitting states to set their own cut-off dates.
C Shekar Reddy, national president of the Confederation of Real Estate Developers’ Association of India (CREDAI), said that while there is a need to reduce general rate of interest and add a 3 per cent subvention for affordable housing, supply side issues will only be ironed out by easier land availability and quicker approval systems.
The plan has its critics too, with slum rights advocacy activist Medha Patkar opposing the move to reintroduce cut-off dates for slum eligibility.