Missing: Relief for poor and middle class

In the bargain, govt also missed an opportunity to push its affordable housing agenda

The Budget for 2022-23 is growth-oriented, capital expenditure-driven, promoting infrastructure, both physical and digital – all to facilitate ease of doing business. The push is for macro growth by encompassing and building an ecosystem for a digital economy, fintech and promoting climate change-related measures.

In this direction, the outlay for capital expenditure has been sharply stepped up to Rs 7.5 lakh crore for 2022-23 from Rs 5.54 lakh crore in the current fiscal — a 35.4% increase, 2.9% of the projected GDP of FY23.

On the other hand, the Budget has not made any attempt to leave more money in the hands of the poor and the middle class, who are reeling under the economic and other effects of the pandemic – such as by giving tax benefits to the middle classes or by giving direct income support to the poor.

The bottom 30-50% of the population cannot be just left to fend for themselves even as the government is comfortable with the buoyancy in indirect tax collections and revenue receipts of more than 60% during this year.

The vulnerable masses in the informal sector and the middle class, who have taken the brunt of the pandemic, need direct and indirect support from the government, bankers, through the creation of a social security net and by providing income support, reducing their income tax outgo, GST rates, etc. The Finance Minister did not address these issues.

The Budget has not provided any I-T relief to households, either by way of enhancing the standard deduction nor by increasing the ceiling for rebates under Section 80C and Section 24, and Section 80EEA and Section 80EE, which pertain to deductions for ‘affordable housing’ and rebates under principal and interest for borrowers who avail housing loans from banks and Housing Finance Companies.

The much-expected enhancement of ceilings by at least Rs 3 lakh under principal repayment and Rs 5 lakh toward interest payments on housing loan EMIs, and expanding the scope of definition of affordable housing to include properties of up to Rs 60 lakh to claim benefits under Section 80EEA and 80EE have not materialised. Neither did the expectation of an enhanced limit for ‘setting off loss’ from Rs 2 lakh to Rs 3 lakh happen, although the government wants to push rental housing, especially to overcome the urban housing crisis.

The government’s ‘Housing for all by 2022’ goalpost has now been shifted to ‘Shelter for all’ and that by 2024 under affordable housing/Prime Minister Awas Yojana. The Budget has allocated Rs 48,000 crore to build 80 lakh houses under PMAY — both rural and urban during FY23. This fiscal, 4.49 lakh houses have been completed under urban PMAY against a target of 14.56 lakh units. Under rural PMAY so far, 1.69 crore units have been built against a target of 2.63 crore.

The great expectation was that the Budget would address the definition of ‘affordable housing’, which has become the main reason why these targets are not being met. The limit of Rs 45 lakh fixed per apartment/house to qualify under affordable housing warrants enhancement to at least Rs 60-70 lakh as it is difficult to find housing within the Rs 45 lakh bracket in metros like Mumbai, Delhi and Bengaluru.

In addition, there is a rider that such apartments cannot have more than 90 sqm carpet area for MIG-1 and 110 sqm for MIG-2 categories to be eligible for the direct benefit of ‘interest subsidy’ under the PMAY cash-linked subsidy scheme (CLSS). This is a case of burning the candle from both ends, and impractical.

Another anomaly is that to claim the 1% GST benefit under affordable housing without input cost-benefit, the carpet area of the apartment should be 90 sqm for non-metros and 60 sqm for metros. PMAY/CLSS and GST requirements are thus at cross purposes and defeat the very goal of promoting affordable housing.

The above anomalies and applicability of RERA for under-construction apartments have resulted in mounting inventory to the tune of 10 lakh houses, resulting in troubles for all stakeholders: the 3 Bs — builders, bankers, and buyers.

The demand to accord ‘infrastructure’ status to the real estate sector, which contributes 10% of GDP and supports multiple industries and would have a multiplier effect, has been left out again.

In fact, the Productivity Linked Incentive (PLI) scheme should have been introduced to the affordable housing sector to incentivise builders to claim tax-holiday on profits earned from affordable housing projects under Section 801BA.

Tax cuts under short-term capital gains to 10% and holding period to one year for REITs and InvITs to attract long-term funds for affordable housing and infra (road, highways), which have long gestation periods, continues to be on the wish list.

(The writer is a former banker)