Housing ministry seeks tax sops for affordable housing projects

The housing ministry has sought tax sops including a year's extension of a benefit under Sec 80 IB (10) of the Income Tax Act for developers of affordable housing projects, according to senior official. In its proposal to the finance ministry, the housing ministry has also suggested that the deduction allowed under Sec 80 IB (10) , which is to be withdrawn from April 1, should be extended to affordable housing projects approved after the current cut-off date of March 31, 2008. According to the official, the ministry has also sought service tax exemption for private developers of affordable housing projects. At present, the exemption is available under government-run schemes including Jawaharlal Nehru Urban Renewal Mission, Rajiv Awas Yojna and Affordable Housing in Partnership. India's housing sector has been witnessing some financing pressure of late, with a slowdown in sales and stricter lending rules making financing difficult. Besides, credit for the sector is costly, which makes it difficult for home developers to lower prices. To ease the situation, housing minister Ajay Maken has recommended infrastructure status for the sector under Sec 80 IA of the Income Tax Act. At present, only those housing projects that are part of transport projects are accorded this status. "We want this (infrastructure status) predominantly for residential segment, as there is a huge shortage of houses for the poor in the country," Maken said. Official estimates peg the shortage of homes in the country at over 18.78 million, of which 96% are in the economically weaker section and low-income group categories. Maken said that while housing loans up to Rs 25 lakh is treated as priority-sector lending, there is need for a separate sub-group for loans up to Rs 5 lakh. "A mandatory requirement of 3% incremental bank deposits in housing stock should be exclusively directed only for the sub-group of housing loans up to Rs 5 lakh." The minister has also suggested that the Reserve Bank should to create a sub-category for housing under commercial real estate (CRE) and reduce provisioning norms for it on the lines of general exposure. Under RBI guidelines, the housing sector is treated at a par with commercial real estate. While banks must have a provisioning of 1% for their CRE exposure under the standard category, general exposure under the standard category only requires a provisioning of 0.40%. Maken has also recommended that loans to the CRE (housing) sector should be kept as standard and not be classified as non-performing asset if loan repayment exceeds six months from the date of commencement of commercial operations, like is the case with all other non-infrastructure projects. Source (Ravi Teja Sharma, ET Bureau, 22 Jan, 2013, New Delhi) : "Housing ministry seeks tax sops for affordable housing projects."