A house or flat classified as affordable housing is one that is worth up to Rs 45 lakh and has a carpet area of up to 90 square metres in non-metropolitan cities and towns and 60 square metres in large cities.
According to several top executives who spoke with Business Standard, the real estate industry, which has witnessed record highs in sales and launches in the past year, anticipates that the government will recognise it as an industry and provide some tax benefits to encourage the purchase of affordable homes.
Brigade Enterprises’ managing director, Pavitra Shankar, stated that “one of the long-standing demands” in the industry has been the current state of affairs.
“This would provide easier access to institutional financing, streamline regulatory processes, and enhance investor confidence,” she stated.
The sector’s acquisition of industrial status will facilitate the flow of capital and boost the involvement of international investors, according to Vestian CEO for APAC Shrinivas Rao.
Small and medium-sized builders are currently “fighting” for space and can only borrow money from private financiers at exorbitant interest rates, according to G Hari Babu, head of NAREDCO.
“The government will save these small and medium-sized developers by giving the real estate sector industry status. These small builders will be eligible for lower-rate loans and will be granted the title of MSMEs due to their industry position, he stated.
The industry also anticipates that the Centre would implement policies, including as tax cuts, to increase demand for reasonably priced homes, which are often valued at less than Rs 50 lakh.
Ramani Sastri, chairman and managing director of Sterling Developers Pvt. Ltd., stated that “the government should raise the deduction limit for interest payment on home loans from the existing Rs 2 lakh a year to Rs 5 lakh, which will add momentum to housing demand.”
The chairman and CEO of CBRE for India, South-East Asia, the Middle East, and Africa, Anshuman Magazine, stated that the Centre used to offer a 100% tax exemption of the earnings and gains from the business of creating and constructing affordable housing projects.
“However, the tax holiday expired in 2022,” he stated. “A revival of the scheme would benefit developers of affordable housing projects, as such projects typically operate on thin margins.”
This occurs at a time when the emergence of luxury housing in India is making it difficult for affordable housing to hold onto its market share.
A few executives also stated that the concept of affordable housing has to be modified.
The Ministry of Housing and Urban Poverty Alleviation defines affordable housing as having certain parameters, including price, size, and buyer income.
A house or flat classified as affordable housing is one that is worth up to Rs 45 lakh and has a carpet area of up to 90 square metres in non-metropolitan cities and towns and 60 square metres in large cities. Conversely, the Reserve Bank of India defines it in terms of bank loans to individuals who want to buy or build a home.
According to Magazine, “The government should consider increasing the size criteria for metro cities to 90 sq. and establishing three to four brackets of unit sizes and prices to define the eligibility criteria depending on city/state dynamics, as capital values in larger metro cities (Mumbai, Delhi-NCR) can be significantly higher vis a vis other cities.”
Additionally, the 5% Goods and Services Tax is applicable to housing projects without the input tax credit (ITC), with the exception of the affordable housing segment. Without the ITC, the GST for affordable housing is one percent. On the other hand, the GST varies from 12 to 28 percent on important building materials including marble, tiles, glass, prefabricated structural components, etc.
The business community insisted that ITC be brought back.
“The government should also consider reintroduction of input tax credit, to enable the smooth transfer of benefits by the developer to the end customer,” Pavitra stated.