Is housing really infrastructure?

Feb 16 2013, 09:28 IST
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SummaryA long-standing expectation of the real estate sector is the coveted infrastructure tag.

Therefore, it is important to incentivise developers to construct houses of small sizes, so as to meet the demand and bring the prices under control, says Rupesh Jain, partner, Vaish Associates Advocates.

It is a moot point whether this incentive has really led to an increase in the supply of affordable housing. There are several examples of recent home owners being sold a property say a 4BHK apartment measuring 2,500 sq ft that would comprise one 2BHK apartment of 1,500 sq ft and another 2BHK apartment of 1,000 sq ft. The apartment would doubtless come with two front doors and two name plates.

Of course, there were some instances of the section being misused but largely it was successful in encouraging construction of large scale affordable housing. It should be brought back in some form in the coming Budget, says Bajaj. In our view, it is still necessary to continue with a tax holiday for housing, adds Jain.

Other stakeholders say that the focus of any incentive should be on affordable housing. Given that the relevance of housing as a social need has been recognised, the sector needs to be supported by adequate policy initiatives and interventions, especially with respect to the creation of affordable housing stock, says Sachin Sandhir, MD, RICS- South Asia.

The truth is that while affordable housing may qualify for the status, the luxury segment does not qualify in any way at all. One has to be therefore very careful. Putting affordable housing in the infrastructure category, would make funding would become soft and would attract a large number of entreprenuers to enter this segment in a dedicated manner, says PSN Rao, professor of housing, School of Planning and Architecture, New Delhi.

Puri says that one alternative would be to bring in the concept of special residential zones (SRZ) on the lines of the SEZ. A SRZ could be a model of affordable housing development that represents an economic microcosm tailored to attract developers via various incentives and tax breaks. A significant feature would be subsidised rates for land and construction materials. Moreover, the government would put in place the necessary infrastructure to make the SRZ approachable and inhabitable.

Hurdles ahead

In a recent move, the RBI turned down a proposal by the finance ministry to give the status to the real estate sector that was first reported by The Financial Express.

The central bank has cited concerns about the likely adverse implications of

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