Venkaiah Naidu Urges State Governments to Reduce Stamp Duty for Affordable Housing

The Ministry of Housing and Urban Development has written to states government to reduce the stamp duty as it is adding to the burden with a new Real Estate Regulation Bill where the rules are almost ready and will be announcing at any time, union minister, Mr M Venkaiah Naidu said at an ASSOCHAM event.

The slum clearance is one of important aspect which is yet to pick up in the country and area of concern as lots of people are coming from rural to urban area and living in slums and we are also trying to motivate the states government, said Mr Naidu while inaugurating a national summit on ‘Finance for Housing for All,’ organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

On the GST, Mr. Naidu said, “the government is continuously engaging itself with different parties not only with Congress party but possibly each and every party. At the end of the day, we want to get GST passage through consensus. The biggest beneficiaries of the GST will be state. The signals I am getting from all sides is positive. I hope the GST Bill will be passed during this session itself,” he added.

“There are certain apprehensions and real estate market itself is yet to pick up but now the economy is picking up and I am confident that the real estate sector also will pick up. He said, the private sector is not showing that much interest in affordable housing sector. We are going to extend this interest subsidy even to private sector provided if they select beneficiaries through the state agencies. We are ready to extend them also," said Union minister.

The World Bank and ADB are also showing interest in this affordable segment of the housing and will sure it will pick up in coming future, said Mr. Naidu.

Housing for All Mission for urban areas will be implemented during 2015-2022 and this Mission will provide central assistance to implementing agencies through States and UTs for providing houses to all eligible families/beneficiaries by 2022. “My Ministry's priority is to provide all beneficiaries with access to safe and affordable housing. This is the first step in building strong and healthy communities where individuals and families can prosper”, added Mr. Naidu.

The mission will support construction of houses upto 30 square meter carpet area with basic civic infrastructure. States/UTs will have flexibility in terms of determining the size of house and other facilities at the state level in consultation with the Ministry but without any enhanced financial assistance from Centre. Slum redevelopment projects and Affordable Housing projects should have basic civic infrastructure like water, sanitation, sewerage, road, electricity etc. ULBs should ensure that individual houses under credit linked interest subsidy and beneficiary led construction should have provision for these basic civic services.

Beneficiaries of Economically Weaker section (EWS) and Low Income Group (LIG) seeking housing loans from Banks, Housing Finance Companies and other such institutions would be eligible for an interest subsidy at the rate of 6.5 % for 15 years or during tenure of loan whichever is lower. The Net Present Value (NPV) of the interest subsidy will be calculated at a discount rate of 9 %.

Housing and Urban Development Corporation (HUDCO) and National Housing Bank (NHB) have been identified as Central Nodal Agencies (CNAs) to channelize this subsidy to the lending institutions and for monitoring the progress of this component.

The credit linked subsidy will be available only for loan amounts upto Rs 6 lakhs and additional loans beyond Rs. 6 lakhs, if any, will be at nonsubsidized rate. Interest subsidy will be credited upfront to the loan account of beneficiaries through lending institutions resulting in reduced effective housing loan and Equated Monthly Instalment (EMI). Another component of the mission is Affordable Housing in Partnership that is a supply side intervention.

To increase availability of houses for EWS category at an affordable rate, States/UTs, either through its agencies or in partnership with private sector including industries, can plan affordable housing projects. Central Assistance at the rate of Rs. 1.5 Lakh per EWS house would be available for all EWS houses in such projects.

The Budget 2016-17 moved in the direction of facilitating the much desired eco-system to mobilise resources and according benefits of infrastructure status for housing and construction sector.

Initiatives taken up in this regard, service tax exemption has been announced on houses up to 60 sq. meters including PPP projects; 100% deduction on profits allowed for affordable housing projects approved during June 2016-March 2019 and completed in 3 year time from approval. Houses upto 30 sq.mt in four major cities and up to 60 sq.mt in other cities are eligible for this benefit. This will motivate quick formulation and completion of projects.

To promote rental housing which meets the needs of migrants and those who can’t afford to build a house, income tax deduction limit for house rent has been increased by Rs.36,000 (from the present Rs.24,000 to Rs.60,000)

For the first home buyers, an additional deduction of Rs.50,000 allowed if loan amount is less than Rs.35 lakhs and loan sanctioned in 2016-17 and cost of house is below Rs.50 lakhs;

Real Estate Investment Trusts (REITS) and Infrastructure Investment Trusts (InVITS) encouraged by withdrawing 17% Dividend Distribution Tax; Excise Duty exemption extended to Ready Mix Concrete;

Other announcements like Modernisation and Digitization of land records, facilitating Ease of Doing Business and further liberalization of FDI conditions would also go a long way in channeling the much desired investments into housing sector including affordable housing.

Others who also spoke during the event were Mr Arjun Ram Meghwal, Hon’ble Minister of State for Finance, Mr Sunil Kanoria, President, ASSOCHAM, Mr Sriram Kalyanaraman, MD & CEO, National Housing Bank, Mr Rajeev Talwar, Chairman, Urban Development Committee, Mr S.C. Aggarwal, Chairman, Micro Finance Committee, ASSOCHAM and Mr D.S. Rawat, Secretary General.