In a big push for infrastructure in India, the Central Government may consider extending tax benefits for global private funds for deploying investments in Indian affordable housing projects as per sources. The FY2022-23 Union Budget is expected to declare exemptions as per Section 10 (23 FE) of the IT Act to other segments of non-resident investors, including real estate funds that focus on affordable housing. This will lead to higher capital flow for such projects.
Amongst Indian sovereign funds, an anchor investor is the Abu Dhabi Investment Authority (up to $900 million) while HDFC has its affordable housing fund of $1.1 billion and BAE Systems Pension Funds Investment Management Ltd has deployed $130 million in its Investcorp fund for affordable housing. The industry estimates tie-ups of many developers with these funds for investing roughly Rs. 3,500 crore.
Some experts have stated that 7-8 sovereign funds have already got exemption-linked benefits while more investments are needed for catering to rising affordable housing demand. Business Head, Data Intelligence and Asset Management, PropsAMC, Anand Moorthy, stated that India will need around 25 million affordable housing units over the next decade with $5 trillion in approximate investments. He stated that while affordable housing demand is skyrocketing, infrastructure supply may not be able to fulfill the same for the next 2-3 years. Moorthy also opined that more pension funds, sovereign funds and private players should contribute towards raising the capital needed. He also added that investments in Indian real estate will give far higher returns to global funds as compared to several other nations.
He also felt that affordable property should be clearly defined as those less than 500 square feet with an increase in the price threshold to Rs. 50-60 lakh. The 2022 Union Budget is anticipated to continue the country’s major thrust on affordable housing and infrastructure with an extension of the extra interest deduction of Rs. 1.5 lakh for affordable housing projects till March next year. There is growing demand for amending the affordable housing definition as well.
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Published Date: Jan 14, 2022
