Real estate developers’ body National Real Estate Development Council (NAREDCO) has recommended to the finance ministry to come up with the second tranche of the Special Window for Affordable and Mid-Income Housing (SWAMIH) fund with a corpus value of ₹50,000 crore in the upcoming budget for the financial year 2024-2025, saying the move is expected to benefit both home buyers as well as the industry.
In a letter to Union Finance Minister Nirmala Sitharaman, NAREDCO also sought other budgetary support and relaxations, including allowing input tax credit under GST and incentives for rental housing, in order to achieve “housing for all.”
The developers’ body said that the SWAMIH fund has played a critical role in completing many stuck projects, leading to renewed interest among investors, both foreign and domestic, in the Indian real estate sector.
“As the ultimate beneficiaries of the fund are the home buyers who have been able to take delivery of their long-stuck dream homes, extension of the lending scheme would be a win-win scenario for both the industry and buyers,” the association said.
In November 2019, the central government had launched the SWAMIH Fund to help complete over 1,500 stalled housing projects, including those that have been declared non-performing assets (NPAs) or had been admitted for insolvency proceedings. The move was expected to help almost 4.58 lakh housing units across the country. Only RERA-registered projects with a positive net worth were to be provided funding. The size of the fund is ₹15,530 crore and is being managed by SBICAP Ventures, a wholly-owned subsidiary of the State Bank of India.
The government had recently informed Parliament that as of November 16, 2023, 342 proposals aggregating to ₹37,554 crore have been approved under SWAMIH. This will benefit around 2,18,699 homebuyers and unlock projects worth ₹94,367 crore.
NAREDCO has also demanded other budgetary support and relaxations including allowing input tax credit (ITC) under GST and incentives for rental housing in order to achieve the housing-for-all target.
The industry body has also requested that the option of claiming input tax credit by residential project developers with higher GST be permitted.
After the introduction of RERA, NAREDCO said the accounting has improved with regard to ascertaining the project cost. ITC would also help in enhancing compliance as it would encourage developers to reduce unorganised sector purchase from unregistered persons, it said in its letter to the finance minister.
In the letter, NAREDCO president G Hari Babu elucidated the tax burden due to the concept of notional income from housing property held as stock-in-trade after two years and suggested the amendment of Section 23(5) to either abolish ‘notional income’ or increase the timeline by five years for considering the notional income.
Under Section 23(5) in case of unsold property, held as stock-in-trade and not let out, the annual value of the property after a period of two years post the financial year in which completion certificate was received, will be assessable as income from the property on the basis of its notional rent, the association said.
“Due to three waves of COVID and subsequent lockdowns since two years and consequential impact on the economy, many tenants who were occupying offices and shops have either closed down or negotiated rentals and have paid zero or minimum rentals,” he said in the letter.
To incentivise rental housing, NAREDCO suggested that the tax burden on notional rental income should be exempted.
NAREDCO has also suggested several other taxation related amendments including removal of the ₹2 lakh limit of interest deduction under Section 24 of IT Act 1961 on housing loans in order to boost housing demand.
To enable real estate projects get better liquidity, the industry body has recommended giving MSME status to projects with the required parameters and also allowing priority sector lending for real estate projects.