In a move to push rental housing in urban areas to meet the growing need of migrant population on the lines of other countries, the government has proposed to give both direct and indirect tax relief to house owners and tenants as well by Centre, states and local governments.
The draft Rental Housing Policy has proposed this based on the fact that renting of homes is treated as a "commercial" activity which increases property tax for individuals and service taxes for institutional rental housing operators such hostels/ PGs and dormitories wherein electricity and utility rates are calculated at par with commercial properties and thereby reducing the rental yield. "Higher outflow due to commercial treatment deters the growth of rental housing," the report says, which has been circulated to states for their feedback.
The report also mentions that the Income Tax Act provides exemption of tax deduction for house rent allowance (HRA) for an employee, which is around 40% on the basic salary. "It is estimated that the urban poor might be paying monthly 30% of their income as house rent without any incentives. The share is much higher in the case of people with less salary in comparison to those who are better paid," a ministry official said.
Arguing for putting in place a robust Rental Housing Policy, the document has suggested different "need based rental housing" models to address diverse housing needs for various segments of the population such as students, working men/ women, construction workers and migrants. These can be owned by individuals, private players, companies and government.
For example, it says that providing housing-to-all on ownership basis is difficult or may not be feasible despite the fact that for governments at Centre affordable housing has been a priority area. Even after taking several initiatives such as subsidies for housing loans and tax concessions the poor cannot afford to own a house due to low disposable and irregular income. And hence there is need to have a separate model for this group.
Considering the fact that poor and those with little income may not be able to pay rent, the policy recommends that states or urban local bodies can incentivize poor owners and tenants through subsidies and tax incentives or rental vouchers. The vouchers provided to urban poor can be used to top up the rent they are paying to move into a habitable space.
The draft policy also highlights that while there is huge housing shortage in urban areas, there are massive stocks of vacant houses. According to the 2011 Census, 11.09 million houses are vacant in urban areas. "While exact reasons for the vacant properties are hard to ascertain it is felt that low rental yield, fear of repossession, lack of incentives etc. are the possible reasons. If these vacant houses are made available for rental housing, then some, if not most of the urban housing shortage, could be addressed."
The policy suggests to states to recognize that many urban households live in rental and shared housing, and hence they should consider renting to be one of the various ways to improve housing condition. Some of the recommendations include estimating the number of rental households and landlords, setting up of a cheap arbitration and conciliation service for landlords and tenants that works quickly and facilitate online registration of rental properties, property dealers working in informal sector, grievance redressal system.
Source:-The Economic Times
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