Housing for all, or not?

Shockingly, the critical area of the PM - ‘Housing for all by 2022’ has not been seriously addressed in the Finance Bill, presented by the Finance Minister, Nirmala Sitharaman.

Unfortunately, all the 3 Bs - builders, borrowers, and the bankers have been ‘orphaned’ in the budget, except for some tinkering.

The real estate sector contributing 10-12% to GDP and supporting 238 ancillary units, employing the highest workforce next only to the agriculture sector has been left high and dry.

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All the stakeholders including federations like FICCI, CII, CREDAI, HFCs /NBFCs, bankers, had virtually pleaded for serious, meaningful and sustainable interventions in the real estate sector, which is virtually bleeding with 250 stalled projects valued at Rs 3 lakh crore, inventory mounting to the tune of 8 lakh units -- 4-5% of GDP, low credit off-take of hardly around 7% by the bankers, liquidity crunch faced by NBFCs/HFCs.

Home loan borrowers/prospective buyers of apartments are stuck between the devil and the deep sea, coupled with confusion and anomalies in the PMAY/CLSS schemes, GST and RERA issues. Under PMAY - MIG 1 and MIG 2- 90 sq meters and 110 sq meters carpet area are the benchmarks to be categorised as affordable housing. Shockingly, the GST council stipulates carpet area 60 sq meters in non-metros and 90 sq meters in six metros and make the candle burn at both ends by capping the value of the apartment at Rs 45 lakhs to avail the 1% GST benefit without input credit. None of these have been addressed in the Finance Bill.

The FM has ‘rolled over’ two benefits which were announced in the previous budget. The compulsion was on account of a huge inventory of unsold houses, stalled projects and substantial arrears of PMAY, cash linked subsidy (CLSS) amounts, to be disbursed. Out of Rs 18,358 crore subsidy from FY 2016-2020, hardly Rs 5,300 crore has been provided in the last budget.

In FY20, out of 1.12 crore target, hardly 90 lakh houses have been sanctioned with around 30% of it being grounded! To overcome this issue, the FM rolled over the benefit of Rs 1.5 lakhs rebate, which can be claimed under interest from the housing loan EMIs paid, under section 80EEA, value of apartment less than Rs 45 lakhs, by one more year, till March 2021.

To compensate for the builders, the tax holiday on profits earned from affordable housing projects (AHPs) under 80IBA was also extended by one more year for projects approved till March 31, 2020.

One more dampener for the housing loan borrowers. FM has mooted 2 options for individuals under the income tax. One is the existing pattern/income slabs, standard deductions with exemptions under various sections like 80C, 80DD, 80E, 80G, 80EE, etc., under Chapter VIA. Second, which is now announced under the new lower personal income tax regime -- individuals will have to forego most of the tax breaks especially under section 80C, which also includes interest paid on housing loans.

Is this the way we promote affordable housing? Policy changes/amendments are working at cross purposes and in silos. This warrants a serious relook before the Bill is passed.

The decision to grant 100% tax exemptions for sovereign wealth funds for their investment in infrastructure, will boost affordable housing.