Developers apex body CREDAI has appealed to Finance Minister P. Chidambaram for widespread tax incentives to make real estate the new growth engine of the economy. In a Budget wish list press release, CREDAI president Lalit Kumar Jain has asked for tax exemptions for small houses (under-60 sq.m carpet area) and for special housing zones with tax exemptions on the lines of SEZs that will have 45 sq.m houses for low income groups and 30 sq.m houses for economically weaker sections.

The country’s housing shortage is 18.1 million houses, creating an incremental need for around 10 million homes. Real estate contributes as much as 5.5 per cent to the GDP and together with the construction industry the share goes up to 11 per cent, the report said. Jain also pointed out that the sector is highly labour and capital intensive. Over 400 industries depend on real estate and construction. Suggesting the formation of a proper Real Estate Investment Trust (REIT), CREDAI called for special rental housing projects under the affordable segment, treating the expenditure as capital investment for long-term capital gains, with exemption from Income Tax, Service Tax, VAT and Stamp Duty. Even rental income from these projects must be exempted from Income Tax, as the indirect benefits are far too many, the report said.

The report said that over the last nine months, credit to commercial real estate had dropped by more than 13 per cent and priority lending to housing sector by 1.29 per cent. It said that the present risk weightage of 1.25 per cent had resulted in choking bank finance to real estate which, in turn, impacted the availability of housing stock and the prevailing market-driven high prices.