By Ashoo Gupta

With the Budget 2022-23 slated to be presented on February 1, 2022, the real estate sector looks forward, among other things, to relaxations that promote affordable and rental housing.

Although housing for all in India by 2022 is a key objective of the Government, affordable housing in India is yet to be made accessible to a large segment of the population.

India’s urban population is expected to reach 600 million by 2030. Against this urban housing shortage the country was 18.7 million units in the 2012-2017 period, as per one study. The demand for affordable rental housing has risen due to factors such as rising inter-state migration rates, rising urban population and high costs of home ownership. Despite  this considerable surge in demand and policy measures adopted by the Government such as Pradhan Mantri AwasYojana and Affordable Rental Housing Complexes, the demand remains largely unmet. 

The real estate sector, which employs about seven million people, contributes 6-7% to the country’s GDP and is expected to reach 10% by 2030. In light of the ever rising demand for affordable housing and need for overall demand creation in the real estate sector, which is in the post-pandemic recovery phase, the industry has made a slew of demands to bring the sector back on track.

Key relaxations expected

Existing affordable housing limits need to be enhanced in metros and non-metros so that buyers can avail tax deduction of Rs 1.5 lakh on interest on housing loans taken to buy affordable housing under section 80EEA of the Income Tax Act, and lower GST rates. Bringing larger houses within the ambit of the definition of ‘affordable housing’ will provide additional homebuyers access to these benefits and have a positive impact on the market trend. In this context, the industry wants to redefine the term ‘affordable housing’ based on ticket size instead of area of the unit.

Real estate sector has also urged the Government to increase Rs.2 lakh rebate on housing loan interest so that the middle class with rising incomes can finance their housing. 

Tax sops and exemptions would further incentivise homebuyers and make affordable housing accessible to salaried-class. For instance, increasing the limit under section 80C and section 24(b) of the Income Tax Act to provide deductions on interest and investments.

Overall reduction of costs must be ensured so that more people enter the market as potential home buyers. Lower stamp duty and registration charges could significantly lower the costs. Single-window clearance for timely delivery of projects. Presently multiple approvals are required from over forty departments and there is lack of clarity regarding the regulatory process to be followed thereby making development of a project time consuming and costly. Standardised system would minimise time and costs for both the builder and consumers. 

Developers must be incentivised to take up affordable housing projects by providing concessions, subsidies, simplified regulatory procedures and compliance, while reduced prices, interest rates and loans must be made available to home buyers. Due to the current high interest rates persons, especially those working in unorganised sector find it challenging to finance their housing needs.

Specific demands have been made by numerous industry bodies. Some of these are:

• FICCI asserts that housing and construction sectors have forward and backward linkages and impact nearly 200 sectors. The sector requests holistic support in the upcoming Budget. An interest subsidy of 3-4% on housing loans could also be offered for a period of 3-4 years.

• CREDAI has sought various tax sops to boost housing demand, such as increase in the deduction limit for interest on home loans to Rs 5 lakh from the current Rs 2 lakh, an amendment to Section 80C to increase the limit for repayment of housing loan principal, reduction in income tax burden on rental housing and long-term capital gains on capital assets.

• NAREDCO expects, among other things, an extension in the time limit u/s 80-IAB of Income Tax where a builder can claim deduction of an amount equal to 100% of the profits and gains derived from such business where a project approved by competent authority on or before March 31, 2022 is completed within 5 years from the date of approval.

Introduction of these measures and other demands in 2022-23 budget can promote affordable and rental housing in India and facilitate sustained growth of the real estate sector.

(Ashoo Gupta is Partner at Shardul Amarchand Mangaldas & Co. The views expressed are author’s own.)