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According to a recent CII-ANAROCK survey, it was found that nearly 55% of the net affordable housing supply came from Delhi-NCR and the Mumbai Metropolitan Region (MMR). Industry experts opine that the major reasons for this rise in supply, are the rising population in these two metros leading to increase in demand and the tax sops for affordable housing. The union budget 2019 has also provided ample opportunities for the home buyers to invest.
Tax rebates for buyers of affordable housing units
The government, by enhancing the exemption limit for the general category of individual taxpayers, has increased the buying capacity of home buyers. This is likely to give a boost to the ‘Housing for All’ mission. The provision to provide relief from tax on notional income on second occupied houses under Section 24 and the benefits of rollover of capital gains to two residential houses, could help in reviving the real estate market. Additional tax sops, such as raising the TDS threshold on rental income to Rs 2.4 lakhs and bank deposits to Rs 40,000, will also provide relief to tax payers.
Tax benefits for affordable housing developers
From the developer’s point of view, the exemption on paying notional rent on unsold flats for two years after the year in which the construction is finished, is a useful step in the current scenario. The government has also extended the benefits under Sec 80(i)BA for one more year, for all affordable housing projects approved till the end of 2019-2020, which will further boost demand in the real estate industry. Affordable housing has been given the much-desired infrastructure status and the very classification of affordable housing has been tweaked, to have room for more inventories under the affordable category.
GST rate cut to boost affordable housing demand
In addition, the GST Council’s timely decision to slash rates, has immensely helped to boost demand for under-construction residential properties and also simplify the tax structure and compliance norms for builders. The current tax rate stands at 5% for the normal category and 1% for the affordable housing category, without input tax credit. However, it would have been ideal, if there was more clarity on the taxes to be paid on raw materials like cement and steel, against the final tax liability on under-construction properties.
The market for affordable housing in the MMR
Affordable housing has gradually acquired the necessary attention in the sector and owing to the sops available, developers who had earlier shied away from investing in the sector are now more open. In the present scenario, many large joint ventures are being formed, where bigger names are associating with smaller developers, to construct affordable houses, especially in the MMR. Mumbai, owing to its rapid commercialisation, has become home to the job seekers coming from tier-2 and tier-3 cities of India. Hence, the city has witnessed an immense increase in population over the last five years, fuelling the demand for affordable houses and forcing developers to supply more such units. Locations such as Kandivali, Kurla and Parel, are emerging as preferred affordable housing localities, as a result of development and connectivity.
(The writer is managing director, Ruparel Realty)