Affordable housing given a miss

The Union Budget, presented by Finance Minister Arun Jaitley in the backdrop of favourable economic indicators, has truly missed a great opportunity of architecting policies and programmes for achieving the goal of the major budgetary statement of providing six crore houses under the “Affordable Housing” segment. 

The favourable factors included consumer price index at 5 per cent, wholesale price index in the negative, GDP at 7.4 per cent, foreign capital in-flows at $55 billion in the last nine months, forex reserves at $340 billion, second most vibrant stock market in the world and rupee being stronger by 6.4 per cent etc. The affordable housing segment comprises of two crore houses in the urban areas and four crore in the rural sector along with provision of drinking water, 24 hour electricity, access road, gainful employment to at least one in the family etc.This " miss out " is a  let down, not only to the grandiose vision of Prime Minister Narendra Modi of providing housing for all by 2022 but to the real estate sector which is the economic driver having multiplier effect on employment generation, huge revenue booster to nearly 120 related small and medium-sized enterprises engaged in construction and building activities with trickle-down effect. 

The finance minister is conspicuously silent on the mechanisms and policy prescriptions of providing affordable housing, developing smart cities and the government partnering and engaging with the real estate sector in providing this huge stock of six crore houses to the needy by 2022. The announcement on six crore housing units with an allocation of Rs 22,407 crore in the next fiscal for implementing this ‘vision of shelter’ is not supported by policy initiatives. It is also is silent on how such a huge capital of nearly $ 1. 75 trillion is required for such massive construction which is almost the size of India’s GDP. 

The long standing requisites of several sectors have been addressed. They include conferring infrastructure status to the real estate sector, to accord industry status to affordable housing, to cover real estate under priority sector lending by banks for getting developer loans at cheaper rates – presently at 16 per cent plus – channelising unclaimed deposits with the Public Provident Fund, Employee Provident Fund, Pension Funds, securitisation of assets in the secondary market into the housing sector etc.

The issue of affordable housing is price sensitive with exorbitant cost of land being the main show stopper. The Budget had to address this critical issue of providing land parcels to the builders at affordable prices or on the PPP model. The Budget should have earmarked funds for construction of these six crore units at reasonable prices, beneficiary selection and subsidy arrangements, enforcement provisions on quality of construction and adherence to delivery of completed houses on time.

Silver linings

Still, there are some silver linings to the housing sector in the Budgetary proposals. Firstly, bringing the Non-Banking Financial Intermediaries (NBFCs) registered with the RBI with assets under management of Rs 500 crore and above, under the Securitisation and Reconstruction of Financial Assets and Enforcements of Security Interest Act, 2002 (SARFAESI). This allows banks and financial institutions to auction properties – both residential and commercial – when borrowers fail to repay the loans as accounts become Non Performing Assets  after following a well-defined process. 

The NPA accounts can be brought under auction within 6-8 months under the SARFAESI process and dues recovered by the banks, housing finance companies, recognised by the National Housing Bank and now specified NBFCs. Bankers were looking up to the FM for amendment to the SARFAESI Act by making it still more stringent with a Debt Recovery Tribunal to decide on the appeal filed by the defaulter within three hearings by directing the defaulter to fully close the loan account and not to permit the re-possession of the property by receiving partial dues. 

Secondly, the announcement of capital gains tax on transfer of property from developers’ prime company to a listed SPV for running Real Estate Investment Trust (REIT) would be rationalised. With this, most of the developers who are funds strapped will now launch REITs. The budget also announced that the rental income of REITs from their own assets will have to pass through facility thus clarifying on the double taxation issue. 

The government, if it was serious in providing shelter for all by 2022, should have accorded additional rebate on the interest and principal on housing loans to the borrowers which would have augmented and triggered the growth in the housing sector from both, the demand and the supply side. 

Realising the serious disconnect between the intent and the contents, the FM may come out with supplementary provisions addressing the above issues before the Bill is passed. This will  make the cherished goal of ‘Shelter for All’ by 2022 a reality. Otherwise, the vision will be a mirage – mission incomplete.

(The writer is a Bengaluru-based banker)

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