It is notable that the Budget proposes additional personal income-tax deduction to incentivise investment in affordable housing. It makes perfect sense to policy induce increased resource allocation for the housing sector, as it would step-up demand in allied industries like steel, cement and furniture. And the way ahead is to encourage housing for rental purposes read rental housing, to better cope with housing demand in fast urbanising India.

We do need to purposefully encourage supply of affordable housing, as it would have a multiplier effect across various other “core” and infrastructural industries. The government is seeking to provide housing for all by 2022 and meet demand for nearly 10 million dwelling units by then. But home ownership can only be one option. More often than not, people moving to urban centres would be looking for reasonable rented accommodation and we do need policy measures to proactively better support urbanisation nationally.

Note that to meet ‘housing for all,’ the tax code already provides for a tax holiday on profits earned by developers of affordable housing. Also, there’s provision for tax deduction on interest paid on housing loans up to Rs 2 lakh, for self-occupied property. The Budget has now proposed an addition tax deduction of Rs 1.5 lakh on interest paid on housing loans for houses valued up to Rs 45 lakh. In tandem, we surely need to encourage, for instance real estate investment trusts to form joint ventures with, say, urban local bodies and state governments, to duly step-up supply of rental housing. In parallel, there’s the need to incorporate newer technologies and building practices in real estate.

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The fact of the matter is that conventional brick and mortar constructions tend to be slow and both energy and material intensive. And we do need to accelerate housing construction with innovative technology like pre-fabrication to boost resource efficiency and reduce construction timelines. Abroad in the mature markets, housing and real estate account for almost 50% of GDP. The comparative figure is far lower here and we do need transparent measures to better coagulate resources into housing with clear-cut policy design. For example, bringing real estate under the goods and services tax regime would make ample sense, but this would require an amendment in the GST Act, as real estate is neither defined as a good nor a service.



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