Budget 2019: Housing for all by 2022 a mirage

Since four years thrust has been assigned to housing / real estate and infrastructure to propel economic growth. It will be interesting to evaluate, assess and take stock on the actual performance of these two key sectors especially keeping in view the dream mission of the Prime Minister - ‘Housing for all by 2022’.

Last year’s budget of 2018-2019 accorded infrastructure status to ‘affordable housing ‘ with the creation of Rs 1,000 crore dedicated Affordable Housing Fund’ (AHF) under the National Housing Bank (NHB) with the mandate of building 3.7 million houses in the urban and 5.1 million rural houses (2 crore in urban areas and 4 crore houses in rural areas by 2022). In addition, Rs 29,000 crore allocation to PMAY schemes. The objective of creating such a huge corpus is to facilitate NHB to lend/refinance to HFCs and banks through Prime Minister Awaz Yojana (PMAY)/Credit Linked Subsidy Schemes (CLSS ).

To push affordable housing sector, which is having a multiplier effect and to support the real estate initiatives - both from the ‘supply push’ and ‘demand pull’, last year’s budget granted 100% tax waiver to builders on profits earned from affordable housing projects and extended the ‘benefit window’ till 2022 . Also, increased the exemption limit for rental housing under Section 80GG to Rs 60,000 from Rs 24,000. To promote affordable housing, the income tax benefit was extended by additional Rs 50,000 on interest paid on the housing loans by enhancing the limit to Rs 2,50,000 with a caveat- for the first time home buyers and loans up to Rs 35 lakh with a cost cap of Rs 50 lakh and less.

To give impetus for beneficiaries under the PMAY/CLSS where the EWS, LIG and MIG 1 & 2 get ‘direct subsidy transfer’ ranging from Rs 2.20 lakh-Rs 2.70 lakh, the income eligibility for the beneficiaries for the EWS has been raised to Rs 3 lakhs per annum and Rs 6 lakh per annum for LIG category, with ‘carpet area relaxations’. Interest subsidy of Rs 7,543 crore on housing loan has been credited directly to 3.39 lakh beneficiaries under CLSS.

Dismal performance

Even with the above slew of benefits and policy initiatives to push the affordable housing and the real estate sector, the ‘report card’ for 2018-19 has been pathetic and dismal.

Against the target of 37 lakh houses under affordable housing segment (PMAY urban) for the year 2018-19, hardly 12 lakh houses have been handed over to the beneficiaries across the country. 23 lakhs houses are still under construction. The central Housing and Urban affairs ministry reeling out figures of ‘sanctioned houses’ is misleading.

The yearly target of achieving 37 lakh beneficiaries under urban and 51 lakh under rural is wishful thinking as the central government requires to pump in Rs 1 lakh crore for the present financial year. Till date, barely Rs 34,000 crore has been disbursed.

Inventory of apartments is mounting. The unsold stock as on date has crossed 5 lakh units, which will take nearly 3 years to liquidate.

GST issues on ‘apartments under construction’ is affecting both the buyers and the builders. Presently, an effective rate of 12% GST on under construction apartment purchase and 8% on affordable housing is not pushing the sales as GST is not required to be paid if one purchases ready to move apartments with occupation certificate. Hence, the government has to immediately reduce GST on affordable housing to 5% to augment sales and parallelly allow ‘input tax credit’ to builders which will boost the supply side.

Prohibitive Stamp duty and registration fees will have to be brought under the ambit of GST.

Costly bank borrowings to the builders is preventing them from venturing into affordable housing. This has led to increased unsold stock, defaults in repayments. Infrastructure status has to be accorded to the entire 'real estate sector' to overcome these issues.

The entire lending activity in the real estate sector, especially under affordable housing has come to a grinding halt on account of banks' humongous NPAs / stressed assets issues to the tune of Rs 12 lakh crore, cases stuck at the NCLT and 11 public sector banks under Prompt Corrective Action (PCA- prevented from lending/recruitment). Such PCA banks should at least be permitted to use their funds, to lend to NHB through the AHF for onward lending to HFCs, at concessional rates to boost affordable housing.

The Real Estate Regulation Act (RERA) to be made more effective in redressing customer complaints/builder disputes.

In sum, diarrhoea of policies without pragmatic/timely implementation and not addressing to the collateral issues, that are affecting the real estate sector- affordable housing becomes a misdirected effort with huge costs, time overrun, activity mistaken for achievement and the grandiose mission of ‘housing for all by 2022’ - a mirage.

(The writer is a Bengaluru-based economist and banker)