According infrastructure status to the affordable housing sector, as proposed by Finance Minister Arun Jaitley in the Union Budget 2017-18, will open the door to foreign funds at cheaper costs to developers, experts said on Wednesday.
The move will attract greater investments in the sector, they added.
The budget proposals also make the affordable housing developers eligible for the government's incentives, tax benefits and institutional funding.
"Affordable housing developers will now be eligible for several government incentives, subsidies, tax benefits, and most importantly, institutional funding," said Neeraj Bansal, Partner and Head of Real Estate & Construction, KPMG in India.
"The infrastructure status could also mean that the government may release land specifically for affordable housing development in central locations of major urban centres in India," he said.
Partner with Deloitte Haskins & Sells LLP, Hemal Mehta said: "With the infrastructure status, developers can access foreign funds at a cheaper cost by way of debt and it will be a priority lending for banks as well. This should result in progress in the sector."
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Tata Housing's MD & CEO Brotin Banerjee said the infrastructure status to affordable housing had been a long-standing demand of the sector. "The government has realised that housing and infrastructure can be two pillars to increase the GDP and accelerate economic growth."
Easy and dedicated access to institutional financing and higher limit on external commercial borrowings will attract more investments and assure sustained growth of affordable housing in India, making it the core driving segment for the real estate," Banerjee said.
On the other hand, long-term financing at lower rates will reduce costs of construction for developers, allowing them to pass on benefits to consumers. The new status will increase the resource allocation for the sector, catalysing housing supply and reducing the supply gap, he said.
Experts also say the move will not only allow access to cheaper loans to developers of budget housing but significantly boost the sector in achieving the government target of Housing for All by 2022.
"The affordable housing sector has seen a significant change in the government's existing scheme, with the qualifying size requirements now changed from built-up area to carpet area of 30 sq.m and 60 sq.m for projects within the municipal limits of the large four cities," Amit Enterprises Housing CMD Kishore Pate said.
According to property consulting firm Knight Frank India's CMD & Director Shishir Baijal, the shift in eligibility criteria for affordable housing from built-up area to carpet area will increase the unit size by 20-30 per cent and will offer home buyers the benefit of owning larger units.
This will also encourage leading real estate players to enter the affordable housing segment.
The Finance Minister reduced the holding period for land and buildings from three years to two years for long-term capital gains purpose. "This would help improve investability in properties in comparison to shares and stocks where the period is one year," Bansal said.
Baijal also said the move in connection to long-term capital gain tax would help the marketability of real estate as an asset class.
"Changes in the taxation aspect of JDA (Joint Development Agreement) will greatly encourage more land owners to partner with developers that will benefit the real estate developers and in turn is likely to benefit the end consumers," he added.
--IANS
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