Prime Minister Narendra Modi has promised housing for all by 2022, when India completes 75 years of its Independence. This is an ambitious plan, which will require budgetary support as well as smooth coordination between multiple ministries.
Real estate lobby CREDAI says there is a strong correlation between housing and economic growth and a revival in the housing sector will also boost the country's GDP, which has grown at sub-5 per cent over the last two years.
CREDAI has come out with a few suggestions that will help the Modi government implement its promise of housing for all:
1) The government should implement the reports of the two task forces on affordable housing and rental housing. These are low hanging fruits, it said.
2) The government must reduce the cost of borrowing for the housing sector. This can be achieved by providing interest subvention for low income borrowers. The government should also increase the access to finance by developers. To augment financing for the housing sector, the government must a) remove the minimum requirement of 50,000 square meters and capital requirement of $5 million for FDI in case of affordable housing; b) allow automatic ECB (external commercial borrowing), and c) allow higher refinance from NHB to Housing Finance Companies.
3) Investments worth Rs. 5 lakh crore in the housing sector are stuck for want of environment clearances. The government must do away worth environment regulations for the housing sector.
4) The government should ease the burden of taxes on the housing sector. Housing faces a disproportionate incidence of taxes amounting to more than 35 per cent of the cost of a completed unit. This can be partially alleviated by giving tax treatment of SEZs to affordable housing projects and providing benefits under Section 35 AD to the real estate sector. Increasing threshold limits of deduction on interest to Rs. 5 lakh on housing would provide incentive to the home owners. Subsidies must be targeted properly.
By accelerating investments and increasing employment, the higher growth in GDP would mean that these measures would enhance the tax base of the economy and be revenue positive even in the short run, CREDAI noted.