A major boost to 'affordable housing'

An envisaged by the budget, the National Housing Bank will refinance housing loans up to Rs200 billion.

Finance Minister Arun Jaitley has reserved his best for the real estate sector, which witnessed a slump in the aftermath of demonetisation.
Pledging affordable housing sector an infrastructure status, the budget gave real estate developers enough reasons to cheer.
Realty experts said this would open the door to foreign funds at cheaper cost to developers and attract more investments in the sector.
They argued affordable housing developers would also be eligible for government's incentives, tax benefits and institutional funding.
Anuj Puri, chairman and country head, JLL India, said the government has made some big announcements on the infrastructure front and also on beneficial changes to the affordable housing segment.
While 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, 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, Puri said.
An envisaged by the budget, the National Housing Bank will refinance housing loans up to Rs200 billion.
Pradhan Mantri Awas Yojana, which was launched in 2015 to achieve government's mission of 'Housing for All by 2022', will get Rs230 billion. The scheme will be extended to 600 districts. Under affordable housing, the carpet area of 30-60 square meters will now be applicable as against built-up area of 30-60 square metres - an area increase of 20 per cent.
Puri said the budget has proposed a new Credit Linked Subsidy Scheme (CLSS) for the middle-income group with a provision of Rs10 billion in 2017-18. Also, extension of tenure of loans under the CLSS of Pradhan Mantri Awas Yojana was increased to 20 years from the existing 15 years.
Finance Minister has pledged to build 10 million houses by 2019 in rural India for the homeless and those living in 'kaccha' houses. Allocation to PMAY has been increased from Rs150 billion to Rs230 billion 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," said Puri.
He said under the latest provisions, developers would 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 two years from the earlier three years. More supply will enter the housing market now."
Puri said the applicable exemptions for affordable housing will now be recognised on the basis of carpet area of 30sqm and 60sqm instead of on the basis of saleable area. The 30sqm 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 60sqm on carpet area. This will effectively serve to increase the increase the number of projects falling under this segment, he argued.
Promoters of affordable housing projects will benefit from the additional cushion of two years instead of the earlier timeline of completing their projects within three years.
The 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 Rs3.96 trillion was announced. Budget allocation for highways will go up to Rs640 billion from the earlier Rs576 billion, Puri said.
With the infrastructure status, developers can access foreign funds at a cheaper cost by way of debt and it will be a priority lending for banks as well. This should result in progress in the sector, according to Hemal Mehta - Partner - Deloitte Haskins & Sells LLP.
Analysts said the move will not only allow access of cheaper loans for developers of budget housing but significantly boost the sector in achieving the government target of 'Housing for All by 2022'.
"Allocation for national highways has been stepped up to Rs640 billion from Rs576. 76 billion. The rural roads' construction work will be accelerated to 133km 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," said Puri.
- issacjohn@khaleejtimes.com