Looking for a reformist budget : Lalit Kumar Jain – CREDAI Chairman
Affordable Housing Policy is the need of the hour
Jan 29, 2015
Source : Concept PR
Lalit Jain, Credai Chairman


Mumbai: With lots said and positive hopes shown in the first budget by the NDA government, expectations are high of a massively reformist Union Budget that would give the somnolent economy the jolt it badly needs.


Prime Minister Narendra Modi appears to be  taking calculated  measures towards his vision of a 'Shresht Bharat'.  One sincerely hopes that Union Finance Minister  Mr. Arun Jaitley, will outline a comprehensive plan to boost economic growth by reviving investments and narrowing fiscal deficit. In short, the budget will be first glimpse into the framework of the new government’s economic agenda for the coming years.


There are quite a lot of aspects that need immediate consideration for action as we lost a lot of time in empty promises and hollow talk.


Affordable Housing Policy  is the need of the hour and everybody talks about its and none do anything about it. The least the government can do is to implement the  recommendations of a Task force of appointed by government.


First of all, Housing deserves the status of an industry and affordable housing  a priority treratment with direct and indirect tax concessions since it addresses the needs of the poor.


The recent cut in repo rate  is a “good  beginning”, though “This is  not enough.”

What is needed is, a roll back of all liquidity tightening measures and easing the situation to make cost of funding for both home buyers and developers cheaper than what it is today. A reduction of 200 basis points (reduction of interest rate by 2%) within short span is needed. And if the RBI does not act, the government must take appropriate steps to ease fund restrictions for realty.


RBI also needs to look at the housing sector favourably, and certainly not with negative weightage, as it contributes handsomely to the GDP apart from generating large scale  employment across other dependent industries as well.


Another long pending issue in the sector is Single Window Clearance. Currently the approval process is very lengthy and takes around one-and-a-half yrs to 2 years for approval. The cost of delay in approval adds further to customers spending by 25 to 40%. Gujarat and Punjab have already implemented a single window clearance system which has given a boost to the sector in these states.


We expect the following to be executed immediately and in a short period of time.


Efficient and accountable governance in Building Approval Process by an appropriate initiative at Centre, with all state government officials following a proper and a firm route.


Following returns need to be accepted with government’s priority to –


a.       Administrative Reform:

1. Single Window(including central , state government clearances through standardisation of check list) and online clearances removing human interference to expedite approvals and eliminate corruption.

2. Make the entire system accountable by fixing responsibilities.

3. Amend municipal administration and political control  system within law.

4. Municipal administrative cadre for better human resource                    


b.      Banking reform:

1. Currently the housing sector is marred by misconceptions and with rigid RBI regimes it has delayed projects further adding to rising costs while consumers continue to suffer from increasing prices.

2. Housing to be given a status of Infrastructure and funding to be made easier with easy role over.

3. Home loan rates to be bought below 7.5%, lending rates below 10%

4. Funding to developers to include land cost as well as role over facilities like industry. (the market is cyclical and hence the banks should adjust as per market conditions)


c.       Tax Reforms:

1. Currently housing pays about 36-37% of sale prices in Taxation to Centre, State and local Municipal Bodies in direct & indirect taxes.

2. Fiscal Reforms with FDI, ECB, REIT and mutual funds need to be focused & rationalized

3. Deduction of interest upto 5 lac rupees u/s 24 of income tax act on home loans

5. Capital gains tax ceiling of one house to be removed to promote rental housing

6. 80 IB revival for affordable housing upto 65 sq mtr carpet

7. State to be advised for concessional stamp duty , premium and development charges, property taxes on EWS, LIG and affordable housing

8. Priority sector home loan lending ceiling to be 50 lacs

9. Rental income on affordable housing tenement to be tax exempted

10.Tax rebates for investment in skill training

11.Deduction under 35 ad including cost of land and builing for Slum rehabilitation projects approved under slum rehabilitation rules


d.      Land Reforms:

1. FAR/ FSI to be more than 5 in developed urban areas. For affordable infrastructure lower land component costs, viable public transportation and save Greenland destruction.

A complete relook of FAR system in country on the lines of Hyderabad. If needed land titles to be managed through online registration process which would enhance faster investment in the sector. 

2. It would also be important to relook land inquisitions & Real Estate Regulation bill to achieve the underlined objective of CREDAI.

3. Land title and title insurance

                4. Digitization of land records and system of mutations to be revamped.

5. One language and national land record bank for ease of land transactions.


CREDAI as a real estate body shall make an attempt to present to Honorable PM and the concerned ministers to accelerate growth (GDP) through housing sector.


The recent hike in the ready reckoner could make property expensive and will most likely dampen hopes of home buyers waiting for a fall in property prices. It will also make it difficult for builders to get rid of an increasingly bloated inventory. There has been a revival in the real estate sector over the last few months, and now this hike will certainly hamper that positive sentiment. "Buyers' outgo will increase now and will impact sales absorption further. Any increase in RR rates will have to be passed on to home buyers. This will lead to a decrease in demand for housing.


There will be complication with respect to section 43c of Income tax act where if ready reckoner prices are higher than transaction value then both parties have to pay income tax on differential amount.


The government wants to encourage affordable housing but the increase in ready reckoner rates is contrary to that move. Home buyers will further defer the purchase of property, resulting in an increase in unsold inventory. The Government should instead focus on lowering the taxes in order to make housing affordable to people.


When we talk of economic growth its important to keep cost of business and housing low. All these actions would otherwise stand contrary.


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