Budget To Boost Affordable Housing

In line with the government's ongoing push to affordable housing and 'Housing for All by 2022", finance minister Arun Jaitley on Monday ( 29 February) proposed a 100 per cent deduction for profits to an undertaking from a housing project for flats up to 30 sq. metres in four metro cities and 60 sq. metres in other cities, approved during June 2016 to March 2019, and is completed within three years of the approval. Minimum Alternate Tax will however apply to these undertakings.

He also proposed that the Service Tax will be exempted for housing construction of houses less than 60 sq. m as part of his third Budget Speech.

For small taxpayers, the Finance Minister has proposed to increase the limit of deduction of rent paid under section 80GG from Rs 24,000 per annum to Rs 60,000 to provide relief to those who live in rented houses.

The budget push to affordable housing came in line with the expectations of Sanjay Dutt, managing director of Cushman & Wakefield-India. Dutt had said a day ago that the real estate sector had high expectations from the Union Budget of 2016-17. "The real estate sector wants the upcoming budget to boost the investment environment. Better taxation norms for Real Estate Investment Trusts (REITs), lower cost of borrowing for real estate developers, and giving incentives to affordable housing," Dutt had said.

It appears that the finance minister virtually aligned his speech in line with the budget wish list presented by the real estate industry as he announced sops and tax exemptions for affordable houses.

Expert Speak
The budget push to affordable housing came in line with the expectations of Sanjay Dutt, managing director of Cushman & Wakefield-India. Dutt said: “These incentives for developers would help them focus on construction of affordable housing projects across metros and non-metros cities.” However, according to Dutt, the limit of Rs 50 lakhs as house value is on the lower side in most metros and could have been increased. “The Union Budget also announced increase in deduction to Rs. 60,000 under section 80 GG for those who live in rented accommodation. All these exemptions and incentives would go a long way in increasing the affordability of consumers and incentivizing developers, in line with the government’s ‘Housing for All by 2022’ initiative,” said Dutt of Cushman & Wakefield India.

On his part, Gaurav Karnik, Partner & National Leader - Real Estate & Infrastructure, EY said: “To achieve the objective of building 22 million homes it has been proposed to provide 100 per cent deduction on profits earned by an assessee engaged in developing and building affordable housing project subject to conditions relating to size, completion, etc.”