The affordable housing segment seems to be very attractive and lucrative for the reputed developers, as they are keenly entering or planning to enter this segment. The reason behind private developers in affordable housing segment could be various reforms and incentives provided by the government and the high tax benefits.
Once the housing finance firms and banks get the permission from RBI to lend money to developers to by land, the prices in the real estate sector would reduce even more.
Prime Minister’s vision of Housing for All by 2022 is the biggest promise made by him and various steps and initiatives have been taken by Modi to achieve this vision and goal. The Modi government is taking very sensible and attainable measures which seem to be beneficial for everybody including lenders, developers and customers.
This year’s budget is highly oriented towards affordable housing. There will be a rapid growth in the housing segment in India in the coming 5 years.
The tax benefit scheme in the affordable housing segment by 100% has also been extended by two years and it is now till 2021. All the developers involved in affordable housing projects will be eligible to pay zero tax. Affordable housing segment seems to be the only industry in India where even after making profit, you will have to pay zero tax. In a huge country with an immense population like ours, there has always been a need for more and more homes, and affordable housing will be able to fulfill the same. This tax benefit scheme in the affordable housing segment seems to be the biggest reason for private developers to enter this segment.
The granting of infrastructure status to the affordable housing segment is one of most crucial step taken by the government for the benefit of the builders which in turn, will benefit lenders also. Lenders will be able to borrow funds for long term from pension funds or insurers. The pension funds and insurance firms are required to mandatorily invest a part of their money in the sector of infrastructure, and thankfully, the affordable housing segment is eligible for the same now.
With the implementation of RERA, there will be a stop on the practice of builders duping the customers by taking the full amount of money from them in advance and then not even starting the construction of the project.
Another helpful provision is provided to the builders in situations of unsold flats. Earlier, in a completed project, if a developer had unsold flats, he had to pay a notional rent for all those flats. But now, for one year after the completion of the project, the notional rent will be zero. This will also attract private developers in affordable housing segment.
All these measures by the government may seem small, but they are sure to bring growth and transparency in the real estate sector of India.