The Bhartiya Janata Party came to power with a promise to provide housing for all by 2022. This promise cannot be fulfilled unless the government gives adequate attention towards the Affordable Housing segment. According to a study by Assocham, our country currently requires 18.78 million additional houses, of which 95.62 per cent are in the Affordable Housing sector which comprises of Economically Weaker Section (EWS), Lower Income Group (LIG) and Middle Income Group (MIG).
Real estate experts feel that the Affordable Housing sector cannot achieve its targets unless it is given INFRASTRUCTURE STATUS. They also lament the fact that despite repeated requests the government has not reintroduced erstwhile Section 80 I (B) which gives tax breaks for the Affordable Housing projects nor have they provided any direct sops for this sector. Although the government has increased tax deduction on home loan interest payments by Rs 50,000 to Rs 2,00,000 to encourage people to buy homes. This may not attract potential investors to take fresh housing loans in Tier-1 and Tier – 2 cities, but it will certainly boost demand in smaller cities.
But experts believe that the most important push for the Affordable Housing sector would be to give it INFRASTRUCTURE STATUS as this will improve the access to funding and help in creating more affordable housing stock in the country. But the million dollar question is why should the government award INFRASTRUCTURE STATUS to the Affordable Housing Sector and how will it help?
The answer is this that by awarding INFRASTRUCTURE STATUS, the government officially acknowledges its importance as an industry and as a vital driver of the economy. INFRASTRUCTURE STATUS ensures that the sector becomes entitled to various government incentives, subsidies and tax benefits. It also opens up the sector for institutional funding. All these steps will increase supply of affordable housing and will keep rates in check. It can also mean that the government releases land specifically for affordable housing in central locations.
The INFRASTRUCTURE STATUS will also encourage developers to take up more projects in this area. At present, developers are not showing any enthusiasm in this sector despite huge demand as the margins are very low. The INFRASTRUCTURE STATUS will give them much needed tax benefits. Clearances from the state government, which entail lengthy and time consuming processes, will become a lot quicker. It will relieve them of their liquidity crunch also by enabling them to raise debt from financial institutions and foreign institutional investors at a much lower rate.
It will bring down the cost of housing and projects will be completed at a quicker pace. It will also lead to transparency in real estate transactions.
Not only the developer, but even the buyers would also benefit by cheaper loan availability because with this move, affordable housing will become priority lending sector for banks, which means the funding will become much easier and at a lower cost.
Though the government has not accorded INFRASTRUCTURE STATUS to the Affordable Housing sector but that does not mean that it is not doing anything on this front.
The government has indeed taken number of steps to achieve its goal in the Affordable Housing sector. For instance; the government made a budget allocation of Rs 4,000 crores for affordable housing for urban poor through the National Housing Bank to bridge the demand and supply gap in the Affordable Housing sector. The foreign direct investment (FDI) rules have also been eased. The minimum built-up area requirement has been reduced from 50,000 square meters to 20,000 square meters and the capitalization requirement from $10 million to $5 million for FDI in real estate projects.
Such steps are expected to attract large number of foreign investors and open up new vistas for development and growth in this sector.
The Affordable Housing sector is expected to get boost from growth in the infrastructure too as the government has allocated Rs 37,850 crores to National Highway Authority of India while Rs 14,389 crores have been allocated for the development of roads under Pradhan Mantri Gram Sadak Yojna. At the same time the budget has allocated Rs 7,060 crores for building smart cities also.
Mr Anil Mithas, CMD, Unnati Fortune Group says that the government must make a holistic and long term policy for the Affordable Housing sector in place of working in bits and pieces. Granting INFRASTRUCTURE STATUS to this sector is the most important single step to strengthen it and the government must take this decision at the earliest.
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Real estate experts feel that the Affordable Housing sector cannot achieve its targets unless it is given INFRASTRUCTURE STATUS. They also lament the fact that despite repeated requests the government has not reintroduced erstwhile Section 80 I (B) which gives tax breaks for the Affordable Housing projects nor have they provided any direct sops for this sector. Although the government has increased tax deduction on home loan interest payments by Rs 50,000 to Rs 2,00,000 to encourage people to buy homes. This may not attract potential investors to take fresh housing loans in Tier-1 and Tier – 2 cities, but it will certainly boost demand in smaller cities.
But experts believe that the most important push for the Affordable Housing sector would be to give it INFRASTRUCTURE STATUS as this will improve the access to funding and help in creating more affordable housing stock in the country. But the million dollar question is why should the government award INFRASTRUCTURE STATUS to the Affordable Housing Sector and how will it help?
The answer is this that by awarding INFRASTRUCTURE STATUS, the government officially acknowledges its importance as an industry and as a vital driver of the economy. INFRASTRUCTURE STATUS ensures that the sector becomes entitled to various government incentives, subsidies and tax benefits. It also opens up the sector for institutional funding. All these steps will increase supply of affordable housing and will keep rates in check. It can also mean that the government releases land specifically for affordable housing in central locations.
The INFRASTRUCTURE STATUS will also encourage developers to take up more projects in this area. At present, developers are not showing any enthusiasm in this sector despite huge demand as the margins are very low. The INFRASTRUCTURE STATUS will give them much needed tax benefits. Clearances from the state government, which entail lengthy and time consuming processes, will become a lot quicker. It will relieve them of their liquidity crunch also by enabling them to raise debt from financial institutions and foreign institutional investors at a much lower rate.
It will bring down the cost of housing and projects will be completed at a quicker pace. It will also lead to transparency in real estate transactions.
Not only the developer, but even the buyers would also benefit by cheaper loan availability because with this move, affordable housing will become priority lending sector for banks, which means the funding will become much easier and at a lower cost.
Though the government has not accorded INFRASTRUCTURE STATUS to the Affordable Housing sector but that does not mean that it is not doing anything on this front.
The government has indeed taken number of steps to achieve its goal in the Affordable Housing sector. For instance; the government made a budget allocation of Rs 4,000 crores for affordable housing for urban poor through the National Housing Bank to bridge the demand and supply gap in the Affordable Housing sector. The foreign direct investment (FDI) rules have also been eased. The minimum built-up area requirement has been reduced from 50,000 square meters to 20,000 square meters and the capitalization requirement from $10 million to $5 million for FDI in real estate projects.
Such steps are expected to attract large number of foreign investors and open up new vistas for development and growth in this sector.
The Affordable Housing sector is expected to get boost from growth in the infrastructure too as the government has allocated Rs 37,850 crores to National Highway Authority of India while Rs 14,389 crores have been allocated for the development of roads under Pradhan Mantri Gram Sadak Yojna. At the same time the budget has allocated Rs 7,060 crores for building smart cities also.
Mr Anil Mithas, CMD, Unnati Fortune Group says that the government must make a holistic and long term policy for the Affordable Housing sector in place of working in bits and pieces. Granting INFRASTRUCTURE STATUS to this sector is the most important single step to strengthen it and the government must take this decision at the earliest.
For More Information Visit Us- http://unnatifortune.com/About_us.php