Home buyers can look forward to more affordable housing, as the government has bolstered the segment, giving it infrastructure status in the Union Budget for 2017-18.
Home buyers can look forward to more affordable housing, as the government has bolstered the segment, giving it infrastructure status in the Union Budget for 2017-18. Essentially, it means lower cost of capital, said Samantak Das, national director at Knight Frank, India. Hopes are that the developers will pass on this benefit to consumers. Experts estimate the cost of funds will now be approximately 10% to 12%. “On an average, I imagine a reduction of 150 basis points,” said Neeraj Sharma, partner at Grant Thornton, India.
The move is expected to attract financiers too. Besides, with the infrastructure stamp, companies will now be able to access additional avenues. “For example, we now also have access to the Rs 40,000-crore national infrastructure investments fund (NIIF),” said Kirta Timmanagoudar, managing partner at Brick Eagle Funds, which is in the process of raising a Rs 700 crore affordable housing fund.
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To be sure, low cost of capital will be augmented by tax benefits under Section 80 I (B).
Last year, the government allowed 100% deduction for profits in projects where companies built homes up to 30 square metres in the four metro cities and 60 square metres otherwise. This move, however, failed to spur supply.
Industry watchers said it was too frugal for companies to shift plans. This year, a number of clarifications were made, signaling to the industry that the government is strong in its intention to invigorate this segment. “The benefit has now been extended to five years, instead of three, which is too short a time period to execute because approvals still take time,” said Sunil Rohokale, CEO and managing director at ASK Group. Now developers have more legroom.
The government has clarified that the specification of the floor area has to be calculated as per carpet area, leaving no room for ambiguity.
Experts said the guidelines that can categorise a project as affordable are not clear at the moment; whether Section 80 I (B) completely defines the conditions, or there are other factors, remains to be seen.