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Housing gets a boost in Budget
Housing gets a boost in Budget, The housing sector has been facing rough weather in the last 6 – 8 quarters, thanks to the economic slowdown in the country
The housing sector has been facing rough weather in the last 6 – 8 quarters, thanks to the economic slowdown in the country. The sector has been having problems in raising the project finance to fund the housing projects. The banks were reluctant to lend the housing projects. But, when we consider the potential of the sector in terms of its contribution to the economic development of the country, housing sector has the great promise to turn around the economy as it can rev up the growth and health of about 300 industries, such steel, cement, sanitary ware, paints, electricals, lifts etc.
The country is having a housing shortage of 18.78 million dwelling units. Just to wipe out this housing shortage the investment required is about Rs 14 lakh crores. The yearly supply of 3.5 million units require Rs 4 lakh crores of investment. The finance minister, realising the huge potential of the housing sector, has announced a slew of measures to revive the real estate sector.
The size of the real estate projects eligible for foreign direct investment (FDI) is reduced from 50,000 sq. metres to 20,000 sq. metres and the threshold limit for FDI is brought down to $5 million from $10 million. The Budget has also addressed the affordable housing segment. If a builder allocates third of his project to affordable housing, the limits of minimum FDI limit of $5 million and the minimum area limit of 20,000 sq. metres will not be applicable.
This will boost the affordable housing as the FDI opens up a funding channel to developers. The urbanisation in Tier II and III cities will gain as these cities were struggling to develop such large projects and hence developer’s interest was not forthcoming.
Additionally, an allocation of Rs 4,000 crore has been made to National Housing Bank to build affordable housing in urban areas, Rs 8,000 crore to rural housing and Rs 7,060 crore to commence development of 100 smart cities. The announcement to reviving 20 SEZs will also boost the real estate sector.
The other measure announced by the finance minister is the real estate investment trusts (REITs). REITs will help the sector raise long term funds from both domestic and non-resident Indian investors. The taxation issue how investments in REITs will be taxed is also clarified. This clarification will help gain acceptance from the investors.
