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Budget 2017: The Affordable Housing Sector in India couldn’t have asked for more….

This year’s union budget has come across as the best ever for Affordable Housing sector. We applaud the steps taken by the Government of India’s (GOI) to provide a fillip to the Affordable Housing sector. Mentioned below are the key highlights of the announcements influencing the sector in particular:


1) Infrastructure Status to Affordable Housing

a) Affordable Housing has been imparted ‘Infrastructure’ status which implies that it has finally been recognized as a nation building activity

b) Conferring infrastructure status will make borrowing for Affordable Housing projects easier due to longer tenure of loans, lower rates and better terms

c) Currently, real estate companies, especially local developers struggle to raise bank funding due to stringent debt-equity norms. Infrastructure borrowing has comp

2) Implications on Fund Raising

a) With infrastructure status, universe of investors who can potentially invest in Affordable Housing has gone up manifold

b) We expect insurance companies, pension funds and other sovereign funds that invest in traditional infrastructure sector to consider affordable Housing in the same bucket

c) GOI has already eased norms for registered FPI's for investment in the infra sector (subscribe to bonds issued by unlisted infra companies). Affordable Housing companies can now benefit from the same

3) Enhancement of Tax Breaks

a) Affordable Housing projects applying for tax break under section 80-IBA of the Income Tax Act can benefit from extension of project duration from 3 years to 5 years

b) GOI has clarified that the size of the units for tax benefit would be based on 30 sqm and 60 sqm carpet area for metros and non-metros, respectively

4) Benefits to Home Buyers

a) National Housing Bank (NHB) has been provided with incremental corpus of Rs. 20,000 Cr for refinancing of housing loans. This move would boost the Housing Finance Companies and encourage them to pass on the benefit to home buyers in terms of cheaper home loans

b) GOI has extended the home loan tenure for loans qualifying for Credit Linked Subsidy Scheme (CLSS) from 15 years to 20 years. This will enhance affordability as EMI burden on home buyers would reduce

c) Interest subvention for housing loans has already been announced by Prime Minister Modi which extends the CLSS to Middle Income Group (MIG). As per NHB, now the scheme is extended to home buyers with family income of Rs. 12 lakhs p.a., availing a home loan of Rs. 12 lakhs

5) Other Announcements

a) The allocation to Pradhan Mantri Awas Yojna (PMAY) program has been increased to Rs. 29,000 Cr as against Rs. 20,000 Cr last year. This is expected to open doors for more PPP projects across states

b) For Joint Development Agreements, the liability to pay capital gain tax will arise in the year the project is completed. This will benefit the land owners thereby reducing their income tax liabilities at the onset of an agreement

c) GOI has allowed companies to carry forward of MAT up to a period of 15 years instead of 10 years which will benefit Affordable Housing projects qualifying for tax benefit under Section 80-IBA. Such projects are required to pay MAT at 18% (plus cess and surcharge)


In essence, Budget FY 17-18 has opened doors for the Affordable Housing sector and fulfilled some long standing asks which will go a long way in realising the ‘Housing for all’ mission.