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In its proposal to the finance ministry for the upcoming union budget for FY 2024-2025, the National Real Estate Development Council (NAREDCO) has advocated for the release of the second tranche of the Special Window for Affordable and Mid-Income Housing (SWAMIH) fund, with a suggested corpus of Rs 50,000 crore. Alongside this, NAREDCO has reiterated its longstanding request for residential project developers to have the option of claiming input tax credit (ITC) with higher GST.
The organisation argued that after the implementation of the Real Estate (Regulation and Development) Act (RERA), accounting practices have improved, and ITC would further enhance compliance by encouraging developers to reduce purchases from unregistered sources.
G Hari Babu, President of NAREDCO, proposed an amendment to Section 23(5) for addressing the tax burden associated with the concept of notional income from housing property held as stock in trade after two years. According to Section 23(5), in the case of unsold property held as stock-in-trade and not let out, the annual value of the property becomes assessable as income after two years from the financial year in which the completion certificate was received, based on its notional rent. The suggested amendment aims to either eliminate 'notional income' or extend the timeline by five years for considering notional income.
Furthermore, NAREDCO recommended exempting the tax burden on notional rental income to incentivize rental housing in the country. The industry body has put forth additional taxation-related amendments, including the removal of the Rs 2 lakh limit on interest deduction for housing loans under Section 24 of the Income Tax Act, 1961. Additionally, NAREDCO proposed granting MSME status to projects meeting the required parameters and allowing priority sector lending for real estate projects.
The Special Window for Affordable and Mid-Income Housing (SWAMIH) Investment Fund I was a social impact fund specifically formed for completing stressed and stalled residential projects. The Fund is sponsored by the Ministry of Finance, Government of India, and is managed by SBICAP Ventures Ltd., a State Bank Group company. According to the Finance Ministry, SWAMIH Fund has one of the largest domestic real estate private equity teams focused only on funding and monitoring the completion of stressed housing projects.
Since the Fund considers first-time developers, established developers with troubled projects, developers with a poor track record of stalled projects, customer complaints and NPA accounts, and even projects where there are litigation issues, it is considered as the lender of last resort for distressed projects. The Fund’s presence in a project often acts as a catalyst for better collections and sales primarily in projects that were delayed for years.
Launched in November 2019, it has raised Rs 15,530 crore so far with an aim to provide priority debt financing for the completion of stressed, brownfield and RERA-registered residential projects that fall in the affordable, mid-income housing category. SWAMIH has provided final approval to about 130 projects with sanctions worth over Rs 12,000 crore. The Fund has completed 20,557 homes and aims to complete over 81,000 homes in the next three years across 30 tier 1 and 2 cities. The Fund has been able to complete construction in 26 projects and successfully unlocked liquidity of more than Rs. 35,000 crore.
Due to all these favourable results, NAREDCO envisages that SWAMIH 2.0 would be a game changer with a larger corpus and greater impact.
NAREDCO’s overarching goal through these suggestions is to address various challenges faced by the real estate sector and contribute to the government's vision of achieving housing for all. NAREDCO's comprehensive proposal encompasses financial support, tax incentives, and regulatory amendments aimed at fostering growth in the real estate market, stimulating demand, and facilitating affordable and mid-income housing projects. As the country navigates economic recovery, NAREDCO seeks strategic interventions to bolster the real estate sector's contribution to India's overall economic development.
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