The Aayog has proposed reintroducing the provision of 100% tax exemption to developers involved in approved affordable housing projects to incentivise them to take up more such projects.
Besides, it also proposed tax exemption on the capital gain and rental income for investors from Real Estate Investment Trust (REITs) to encourage affordable housing units to raise funds and reduce the cost of funds for affordable housing units.
“Restoring section 80-IBA will provide a strong fiscal push to developers, improve project viability and encourage greater participation from the private sector,” the Aayog said in its report on ‘A Comprehensive Framework to Promote Affordable Housing’ developed jointly with the ministry of housing and urban affairs.
Section 80-IBA for affordable housing existed from June 2016 to March 2022.
As per the report, affordable housing remains constrained in India not only by the high cost of land and low supply of units, but also by systemic weaknesses in the financing ecosystem.
Both households and developers face barriers that make affordable housing a high-risk, low-return segment, it said. A Real Estate Investment Trust (REIT) is a company or trust that owns, operates, or finances income-generating real estate.
The Aayog has further suggested doubling of the loan limit under the Credit Risk Guarantee Fund Scheme for Low Income Housing (CRGFTLIH) to Rs 40 lakh to sufficiently cover sale of affordable housing.
Further, it has proposed that the National Housing Bank (NHB) should be allowed to issue tax free bonds under Section 54EC of Income Tax Act, the proceeds of which should be used for providing concessional funding for affordable housing projects targeted at the economically weaker sections (EWS) or low-income group (LIG) category of buyers.
According to the report, the charges for change of land use should be exempted with the condition that only affordable housing units can be constructed on such land, while utilizing at least 50% of the permissible floor area ration (FAR) besides exempting all housed under the Pradhan Mantri Awas Yojana -Urban 2.0 and other dwelling units which are part of ‘Affordable Housing Projects’ from stamp duty and registration charges.
In its report on ‘A Comprehensive Framework to Promote Affordable Housing’, developed jointly with the ministry of housing and urban affairs, the Aayog has proposed a slew of incentives for developers and buyers of affordable houses, including reintroduction of the provision of 100% tax exemption to developers involved in approved affordable housing projects and doubling of loan limit to Rs 40 lakh under the Credit Risk Guarantee Fund Scheme for Low Income Housing.
“This will meaningfully reduce the price of the lowest end of affordable housing and make ‘Affordable Housing’ more accessible to buyers and attractive to builders,” it added.