Budget 2017-18 Gives A Boost To
Affordable Housing
by Mr. Anuj Puri, Chairman &
Country Head, JLL India
The Budget that was being touted as a make-or-break
one for the future of India, and the Government made some big announcements on
the infrastructure front and also on 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.
A new Credit Linked Subsidy Scheme (CLSS)
for the middle-income group with a provision of INR 1,000 crore in 2017-18 was
announced. Also, extension of tenure of loans under the CLSS of Pradhan Mantri
Awas Yojana (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 ‘kaccha’ 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, ECBs
(external commercial borrowings). Also, re-financing of housing loans by NHBs
(National Housing Bank) can give a leg up to the sector.
Under the latest provisions, developers to get one
year’s 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 2 years from the earlier 3 years. More
supply will enter the housing market now.
The applicable exemptions for affordable housing will
now be recognized on the basis of carpet area of 30 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 4 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 3 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 INR
3,96,135 cr was announced in the Budget 2017. Budget allocation for highways
will go up to INR 64,000 crore in FY18 from the earlier INR 57,676 crore.
Allocation for national highways has been stepped up to INR 64,000 cr from INR
57,676 cr. The rural roads’ construction work will be accelerated to 133 km of
roads per day in 2016-17, as against 73km/day during 2011-14. A new metro rail
policy will be announced.
On the FDI front, the FIPB (Foreign Investment
Promotion Board) is set to be abolished and a new roadmap 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 liberalize the FDI regime further.
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