Ahead of the Union Budget 2012-13, RICS expects the upcoming budget to provide adequate stimulus to the priority areas within urban infrastructure and housing.
First, there is a dire need for the budget to encourage improvement in supply of affordable and low cost housing along with strengthening access to housing & micro finance.
RICS has proposed the establishment of a dedicated affordable housing fund, similar to infrastructure funds. The Government could contribute partial funding through public issuance of bonds and the remaining component can be raised through retail investments in lieu of tax benefits. These funds should then be made available to developers/ NGO’s/ private intermediates at low interest rates for construction of EWS/LIG housing.
Low yields on rental housing remain a bottleneck for promoting a healthy rental market. Lowering the tax rate on rental income along with taxing a much lower percentage of the rental income would help incentivise rental housing. These steps are also likely to uplift consumer sentiment.
Given the rapid urbanisation and pressure on urban infrastructure, the budget should consider incentives and benefits for large scale residential townships; extend ECB limit whilst the Infrastructure Debt Fund needs to be supported with a robust bond market.
RICS believes the definition of infrastructure could be broadened to include integrated townships of 100 acres or more. To encourage private investment capital, the Government should seek to catalyse private investment and operations into all infrastructure sectors through the participation of long term sources of capital such as insurance and pension funds and bond markets which have investible surplus.
Given the pace of development in India and the fact that India’s position on RICS carbon emission index has slipped to 9th last year from 7th in 2009-10 last, we expect continued support to the ‘National Clean Energy Fund’ as well as incentivising renewable forms of energy.
It is also equally important to better address the significant issue of skill development, especially in real estate and construction sectors which are reeling under severe manpower shortage. Whilst funds have been allocated through various mechanisms, they need to be better channelized and utilised.
RICS VIEWS: PRIORITY AREAS FOR BUDGET CONSIDERATION
Incentives for improving housing supply and affordability
- Create a dedicated housing development fund and promote housing associations
- 100% income tax rebate for housing development where all units constitute affordable housing (Section 35AD)
- Tax holiday to promote development of low cost housing
- Exemption for pre-fabricated concrete slabs to be maintained (Section 80 IB (10)
- Consider taxation on vacant land
INCENTIVES FOR HOUSING FINANCE
- Strengthen micro housing finance mechanisms
- Interest subvention on housing loans
- Tax credits for first time home buyers
INCENTIVES FOR PROMOTING RENTAL HOUSING
- Tax Deducted at Source on Rental Income (Section 24)
Provide a conducive environment for Infrastructure development
- Award infrastructure status to large-scale integrated townships (Section 80 IA)
- Extension on ECB limit for townships
- Support the Infrastructure Debt Fund with a robust bond market
Incentivise low carbon buildings and infrastructure
- Consider a phased introduction of ‘Green Taxation’
- Continue to support the ‘National Clean Energy Fund’
- Continue to encourage renewable forms of energy (including exemption on solar power equipment import)
Create an enabling environment for real estate and construction activities
- Goods and Services Tax (GST) and the real estate sector
- Create a vibrant investment market through a liberalised FDI policy
- Better channelize funds for skill development initiatives
Sachin Sandhir, Managing Director, RICS South Asia