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Budget 2013-14: Real estate sector wants tax sops, industry status

The bad news first: there is a shortage of 18.7 million houses in urban areas, going by the estimates of the Ministry of Housing and Urban Poverty Alleviation. Those affected the most by this shortage are people in low-income groups and economically weaker sections. 

The good news is that this problem can be solved partially. But it will require strong will from the government , particularly from Finance Minister P. Chidambaram, when he presents the budget next month.

The real estate sector has been asking for tax breaks under Section 80-IA of the Income Tax Act to be extended to the housing sector. Section 80-IA was introduced to promote private participation in the infrastructure sector. Under this rule, infrastructure companies are entitled to a 100 per cent tax holiday for 10 years.

Realty companies argue that the shortfall in the number of housing units can be bridged by group housing projects. These will include amenities such as roads, schools, hospitals and retail outlets, leading to infrastructure development. Hence, they argue, infrastructure status should be given to developers building townships or large-scale affordable housing.

Building affordable housing for economically weaker sections has largely been the responsibility of the government. In recent years, some realty companies have tried to develop such housing but most pulled out due to the low margins, which are well below those in the upper-mid and luxury segments. There are expectations that tax concessions could bring these developers back into affordable housing.

With infrastructure status, developers can also get access to funds from India Infrastructure Finance Company Ltd, which gives loans at lower interest rates than commercial banks.