By RV Verma
Union Budget 2019 India: The Budget will give a fillip to affordable housing, both from the supply as well as demand side. Retention of Section 80-IB exempting builders' profits on affordable housing projects is a good initiative for developers to undertake more affordable housing projects.
Though this provision has been carried forward year after year and Budget after Budget, a closer monitoring of its impact will yield better results. This provision is not being adequately utilised by the builder community. The process of approval of eligible projects by competent authorities may need simplification. This benefit, by itself, should be a strong incentive for developers to construct and deliver such projects.
The benefit of tax exemption can also be shared with buyers by way of lower price and better affordability, which could result in higher demand and a virtuous cycle of strong continuing demand and supply. Implementation issues need to be addressed. Lenders, banks and HFCs will also be comfortable lending for such projects since they will be approved by authorities and will be viable, catering to that class of people who are end-users and not investors.
Also, enhancing exemption limit on interest on loans for self-occupied properties from the existing `2 lakh to `3.5 lakh for houses costing not more than `45 lakh is a huge benefit to borrowers who will find loans more affordable. Though this has been made valid up to the end of FY20, it is expected to boost demand for houses and loans, and result in people advancing their decision to avail loans and buy a house early.
Apart from ownership housing, the Budget has recognised the importance of rental housing and the need for enhancing its stock. Increase in rental housing stock will soften the impact of migration to urban centres and proliferation of informal settlements (slums and squatters). A sound rental housing policy as a work in progress and amendment to archaic rental laws will stimulate investments in rental housing from various stakeholders and also result in better planned housing and habitation.
Involvement of corporate entities in addressing the housing needs of their workers through rental housing could bring about significant improvement in living conditions of these segments of the population in urban centres. Some fiscal incentives for such corporates or including this activity as eligible under CSR could yield immediate results.
In short, the Budget provisions for housing do reflect the broader vision of the economy. The transfer of regulatory role from NHB to RBI was a natural corollary to the transfer of ownership of NHB from RBI to the government. However, the supervisory role over HFCs ought to be retained with NHB along with better coordination between the RBI and the NHB.
(The author is Former chairman, National Housing Bank)