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Finance Minister Arun Jaitley on Wednesday said that said that affordable housing will be given infrastructural status, a move that will reduce costs for developers and attract investors.
In his Budget speech, the finance minister said: "We propose to facilitate higher investment in affordable housing. Affordable housing will now be given infrastructure status, which will enable these projects to avail the associated benefits."
"The National Housing Bank will refinance individual housing loans of about Rs 20,000 crore in 2017-18. Thanks to the surplus liquidity created by demonetisation, the Banks have already started reducing their lending rates, including those for housing. In addition, interest subvention for housing loans has also been announced by the Honourable Prime Minister."
Realty stocks surged up to 20 per cent after the government announced infrastructure status to affordable housing and offered tax sops for developers sitting on completed unsold inventories.
Shares of DLF zoomed 7.81 per cent, Godrej Properties surged 5.43 per cent, HDIL jumped 5.2 per cent, Oberoi Realty (4.48 per cent) and Prestige Estates Projects (4 per cent) on BSE.
The BSE realty index was trading higher by 3.58 per cent during the late afternoon trade.
From the non-index stocks, Ashiana Housing skyrocketed 19.99 per cent, Ansal Housing & Construction zoomed 9.83 per cent and Ganesh Housing Corporation jumped 9 per cent.
Shares of housing finance companies also rose with HDFC rising by 3.6 per cent and LIC Housing Finance (2.78 per cent).
The National Housing Bank will refinance individual housing loans of about Rs 20,000 crore in 2017-18. To promote affordable homes, the government also proposed to amend the Section 80-IBA, relaxing the condition of period of completion of the project for claiming deduction from the current three years to 5 years.
Jaitley also said, "In my budget proposals last year, I had announced a scheme for profit-linked income tax exemption for promoters of affordable housing scheme which has received a very good response. However, in order to make this scheme more attractive, I propose certain changes in the scheme. First of all, instead of built up area of 30 and 60 sqmtr, the carpet area of 30 and 60 sqmtr will be counted. Also the 30 sqmtr limit will apply only in case of municipal limits of 4 metropolitan cities while for the rest of the country including in the peripheral areas of metros, limit of 60 sqmtr will apply."
"In order to be eligible, the scheme was to be completed in 3 years after commencement. I propose to extend this period to 5 years.
"At present, the houses which are unoccupied after getting completion certificates are subjected to tax on notional rental income. For builders for whom constructed buildings are stock-in-trade, I propose to apply this rule only after one year of the end of the year in which completion certificate is received so that they get some breathing time for liquidating their inventory.
"We also propose to make a number of changes in the capital gain taxation provisions in respect of land and building. The holding period for considering gain from immovable property to be long term is 3 years now. This is proposed to be reduced to 2 years. Also, the base year for indexation is proposed to be shifted from 1.4.1981 to 1.4.2001 for all classes of assets including immovable property.
"This move will significantly reduce the capital gain tax liability while encouraging the mobility of assets. We also plan to extend the basket of financial instruments in which the capital gains can be invested without payment of tax.
"For Joint Development Agreement signed for development of property, the liability to pay capital gain tax will arise in the year the project is completed."