Give a fillip to housing sector

Finance Minister Nirmala Sitaraman will present her sixth consecutive budget tomorrow, likely as a vote on account, considering the upcoming general elections.

The real estate sector, contributing 10-12 per cent to GDP, supporting 250 ancillary industries, and employing the highest organised and unorganised workforce next only to the agriculture sector via the multiplier effect, has consistently been overlooked in the budgets. In fact, the deadline for ‘housing for all’ has been extended from 2022 to 2024.

The finance minister must focus on the roll-over of certain programmes, reset the deadlines for a few policies to March 31, 2025, implement a targeted sectoral approach to resolving the long-standing woes of the real estate sector, and address the following critical aspects:

Grant infrastructure status to the entire real estate sector, presently restricted to ‘affordable housing.’ This has remained on the wishlist for over a decade. Granting infrastructure status will encourage the builders to take up affordable housing projects by securing loans from banks and HFCs at reduced rates and to engage in ‘mixed construction’ activities. This is crucial for realising ‘housing for all’ by the extended deadline of 2024.

Re-introduce the Credit-Linked Subsidy Scheme (CLSS) under the Pradhan Mantri Awas Yojana (PMAY) until December 2024 to align with the extended timeline of ‘housing for all’ by 2024.

Bring lending to affordable housing under the ‘priority sector’ quota by capping the interest rate at 7.5 per cent fixed for the full tenure of the first-house loan so that the borrowers are not affected by the fluctuations in the home loan rates.

There is an anomaly in the definition of ‘affordable housing’. The budget should address this by redefining ‘affordable housing’ as a residential unit with a 90 sq m carpet area and a Rs 65-lakh flat cost in metros (presently it is 60 sq m carpet area/Rs 45 lakh flat cost) and revise the ceiling from 90 sq m to 120 sq m and the unit cost from Rs 45 lakhs to Rs 55 lakhs in non-metros. By capping the value of apartments at Rs 45 lakhs and the ‘area ceiling’, just to avail 1per cent GST benefit without input credit, the impractical ceiling limits is akin to burning the candle at both ends.

GST for cement at 28 per cent and steel at 18 per cent, which are major components in the construction activity, defeats the main objectives of promoting affordable housing. Rates have to be rationalised to at least 18% for cement and 12 per cent for steel to boost construction activity. 

The non-applicability of RERA for completed housing projects with an occupation certificate has resulted in a dip in sales of ‘under construction’ projects, which attracts GST, resulting in an increase in inventory of unsold stock to around 5,08,464 units at the end of September 2023. 

Consumption has taken a beating. For “demand pull,“ the budget should provide income tax relief to households either by way of enhancing the standard deduction or by increasing the ceiling for rebates under Section 80C (separately Rs 1.5 lakhs additional for principal deduction of housing loan EMIs, not to be clubbed with the ‘Omnibus’ benefits under the section) and Section 24 (deduction under interest paid for housing loans to be enhanced from Rs 2 lakhs to at least Rs 3 lakh), under 24B (Rs 2 lakhs limit to be raised to at least Rs 3 lakhs for home loans availed on or after 01/04/1999) and Section 80EEA ( limit to be raised from present Rs 1.5 lakhs to Rs 2 lakhs for  apartments/house properties having a stamp value of Rs 45 lakhs) and 80EE (interest deduction from EMIs to be increased from the present Rs 50,000 to at least Rs 1 lakh for loan amount up to Rs 35 lakhs for property value of up to Rs 50 lakhs which has ‘rider’ of first loan) which pertains to deductions for ‘affordable housing’ and rebates under principal and interest for borrowers who avail housing loans from banks and HFCs under the old IT slab regime. 

Extend the tax holiday on profits earned from affordable housing projects under Sec 80IBA by at least another year for projects approved until March 31, 2023, to augment the supply of affordable housing and provide compensation to the builders who are in a liquidity crisis coupled with lukewarm demand for the purchase of affordable apartments.

To give effect to the ‘affordable rental housing’ scheme (mooted during the 2020–21 budget) with greater IT benefits to promote rental housing among migrant workers, the urban housing shortage is at 20 million, which can double by 2030.

Single-window approvals with clear timelines for all construction-related permissions.

(The writer is a former banker)