Issues 7 Suggestions in Affordable Housing

1. Issues & Suggestions in Affordable Housing Tax Deduction
in Finance Bill 2016
Presented By:
CREDAI – Pune Metro
Prepared By
CA Vinit Vyankatesh Deo (CMD, Posiview Consulting Partners)
CA Pramod Shingate (Partner, Pramod Shingate & Associates)
CA Vinit Vyankatesh Deo

2. Ideas to Kickstart the economy through MSMEs
Dear Readers,
The pandemic of Covid 19 which is also now know (in)famously as Corona, will lead to a
major remake of the World Economy. Unlike the other crises of this century viz the Dot
Com bust of 2001 and the Lehman crisis of 2008, this crisis will not just affect the
financial world but will shake the foundations of economies of all the countries - right
from Villages and Cities to State and the Nation. Governments at all levels will need to
take drastic measures to first stabilise the economy and then to plan for its growth.
MSMEs are like the veins of the economy. They are essential to keep the supply of
money flowing between the vital organs viz. Large corporates, MNCs, Banks, Government
etc. This brief Concept Note presents 5 ideas that can help revive and grow the MSME
sector.
We urge the Central and State Governments to take swift and drastic steps to revive the
MSME Sector so that it can become a solid foundation for building the revival of Indian
economy in the post-Corona world.
CA Vinit Deo
Founder & CEO, Posiview Policy Solutions
Feedback to mdoffice@posiview.in or +91 89757 61062

3. Date of Original approval after 1st June 2016
Section Clause Issue Suggestion Benefit
Sec 80IBA
Sub
Section 2
Clause b
Proviso (i)
Where the
approval in
respect of a
housing project is
obtained more
than once, the
project shall be
deemed to have
been approved on
the date on which
the project was
first approved by
the competent
authority
If Developers have
approved Projects
which before 1st
June 2016 but
wish to revise the
Plan to make an
affordable housing
project deduction
will not be
allowed.
Deduction should
also be allowed even
if original plan is
approved before 1st
June and project has
not started.
Supply of affordable
housing units will
start immediately if
Developers are
allowed to revise
plans of existing
projects.

4. Completion of the Project
Section Clause Issue Suggestion Benefit
Sec 80IBA -
Sub
Section 2
- Clause b
- sub
clause 2:
“the project shall be
deemed to have
been completed
when a certificate of
completion of
project as a whole is
obtained in writing
from the competent
authority;
It is in the interest of
Developers to
complete the
projects in time.
However if there is a
condition of losing
entire deduction for
not completing even
10% of the project,
Developers will
hesitate to take up
such projects as
partial completion of
the Project will not
be allowed ie partial
deduction cannot be
claimed
Partial Project
completion should
be allowed.
Government can put
some reasonable
condition that
deduction will be
given in proportion
to:
(Area that gets
Completion
Certificate / Total
Project Area)
Objective of the
Government is to
maximise supply of
affordable housing
units. Developers will
be encouraged to take
up larger affordable
housing projects and
make a sincere
attempt to complete
them as they know
that completing in time
would help them avail
full deduction.

5. Restriction on area for Shops to 3% of Total Builtup Area
Section Clause Issue Suggestion Benefit
Sec 80IBA
Sub
Section 2
Clause c
(c) the built-up area
of the shops and
other commercial
establishments
included in the
housing project does
not exceed three
per cent of the
aggregate built-up
area;
Commercial Area
restricted to 3% of
Project area.
Affordable Housing
projects will typically
be 10-25 kms of City
limits for metros and
outskirts of the City
areas in case of non-
metros.
Essential shopping
like Kirana stores,
pharmacies, small
restaurants etc will
be needed to make
the project habitable
to citizens.
Commercial Area
should be 5% of Built
up Area
(Ref: Earlier Sec 80IB
had this limit as 5%
This was later
revised to 3% or
5000 sq ft whichever
is higher)
Citizens will need a
livable environment to
make the project and
the area livable.

6. Projects allowed only within Municipal limits of non-metros
Section Clause Issue Suggestion Benefit
Sec 80IBA
Sub
Section 2
Clause d
the project is on a
plot…...... or two
thousand square
metres within the
jurisdiction of any
other municipality
or cantonment
board;
For metros of Delhi,
Mumbai, Kolkatta
and Chennai, the
project can be
located within 25kms
of the Municipal
limits.
However for non-
metros, the project
has to be located
only within municipal
or Cantonment
Board limits. As the
cost of the land in
such limits is already
high and not in
control of
developers, it may
become unviable to
make such projects.
For non-metros
which have a
Development
Authority (MMRDA
for Mumbai, PMRDA
for Pune), the
affordable housing
projects should be
allowed within
jurisdiction of such
authorities.
For others, a limit of
10 kms from
municipal limits can
be kept.
The Government’s
objective of bringing
maximum possible
land area within the
purview of affordable
housing will be
achieved as vacant
land is most available
in the outskirts of
metros / within few
kms of municipal limits.

7. Area of Units - Whether Carpet or Builtup
Section Clause Issue Suggestion Benefit
Sec 80IBA
Sub
Section 2
Clause e
“the residential
units comprised in
the housing project
does not exceed
thirty square
metres….. or sixty
square metres….”
The clause does not
mention carpet or
builtup for size of
residential units.
Definition of builtup
area is given in the
section.
The incentives in
Prime Minister Awas
Yojana (PMAY) are
based on Carpet
Area. Since this
deduction is being
given to meet the
objectives under the
Housing for All 2022
Policy, we suggest
the same definition
be adopted for
Income Tax purposes
as this deduction is
being given under
the Housing for All
Policy.
There will be an
alignment of projects
under the Housing for
All Policy and Income
Tax Act. This is
important as for
customers to avail the
benefits like the Credit
Linked Interest Subsidy
are given under the
HFA policy, Developers
will have to plan their
projects as per the
area requirements of
that scheme.

8. Utilisation of 90% Area of land for the Project (Metros)
Section Clause Issue Suggestion Benefit
Sec 80IBA
Sub
Section 2
Clause g
Sub-clause
(i)
i) not less than
ninety per cent of
the floor area ratio
permissible in
respect of the plot
of land under the
rules to be made by
the Central
Government or the
State Government
or the local
authority, as the
case may be where
the project is
located within the
cities of Chennai,
Delhi, Kolkata or
Mumbai or within
the area of twenty-
five kilometres from
the municipal limits
of these cities, or
It seems that the
Developer will have
to consume 90% of
PERMISSBLE FAR of
the land which
creates issue like:
1. Getting sanction
on part of a
larger plot may
not be allowed
2. If the developer
wants to
consume less
than 90% FAR, it
may not be
allowed since
words used are
90% of
PERMISSIBLE
and not
SANCTIONED
1 . If Developer
wants to do a
Affordable Housing
project on part of a
larger Land parcel,
the same should be
allowed. As per the
section, it seems
they will have to
subdivide the land
and carve out the
plot for affordable
housing
2. Restriction of
minimum
UTILISATION of 90%
FAR should be
removed as it will
create
Developers who
already have land
parcels / projects
under sanction
should be encouraged
to take up affordable
housing project.
The restriction on
utilisation of minimum
area will become a
non-starter for many
projects.

9. Utilisation of 90% Area of land for the Project (Non-Metros)
Section Clause Issue Suggestion Benefit
Sec 80IBA
Sub
Section 2
Clause g
Sub-clause
(ii)
(ii) not less than
eighty per cent. of
such floor area ratio
where such project
is located in any area
other than the areas
referred to in sub-
clause (i);
A) It seems that the
Developer will have
to consume 80% of
PERMISSBLE FAR of
the land which
creates issue like:
1. Getting sanction
on part of a
larger plot may
not be allowed
2. If the developer
wants to
consume less
than 90% FAR, it
may not be
allowed since
words used are
90% of
PERMISSIBLE
and not
SANCTIONED
1 . If Developer
wants to do a
Affordable Housing
project on part of a
larger Land parcel,
the same should be
allowed. As per the
section, it seems
they will have to
subdivide the land
and carve out the
plot for affordable
housing
2. Restriction of
minimum
UTILISATION of 80%
FAR should be
removed as it will
create
Developers who
already have land
parcels / projects
under sanction
should be encouraged
to take up affordable
housing project.
The restriction on
utilisation of minimum
area will become a
non-starter for many
projects.

10. Other Points
Section Issue Suggestion Benefit
Minimum Alternate
Tax
1) Generally projects are
undertaken in independent
SPVs. Hence the MAT become
an expense to developers as
most of them will not be able
to set off credit.
2) Developers will have to
incur 20% outflow every year
which will reduce the benefit
of the deduction to only 10%
of profits
MAT should not be
applicable for affordable
housing projects
The incentive of just a
10% benefit and in
many cases practically
no benefit due to loss
of MAT credit will make
make it unviable to
take up affordable
housing projects under
this provision
Special Economic
Zones, Industrial
Zones
Deduction is allowed only for
Projects within 25 kms of
Metros and within Municipal
limits for non-metros
Deduction should also be
allowed for affordable
housing projects under
taken in special notified
zones such as SEZ,
Industrial Parks, proximity
of notified Industrial Areas,
Ports etc
There is a need for
housing in proximity of
Industrial and
Commercial areas
which are far away
from city. Incentive to
develop housing in
such areas will boost
Industries also as they
will get quality
manpower close by.

11. Founders & Advisors
▪ CA Vinit Deo, Founder & CEO
Vinit is a Chartered Accountant and an entrepreneur at heart. After a brief stint in
leading Corporates (Times of India Group & Geometric Software Solutions), he co-
founded Posiview Consulting Partners, an investment banking firm which has has closed
over 200 advisory transactions of advising entrepreneurs on business planning, debt
and equity raising. His passion for research and governance led to the founding of
Posiview Policy Solutions, an Data and Insights driven organisation that will suggest
innovative but pragmatic policy initiatives to Governments (Central, State, Local),
Industry Associations, Development Institutions etc.
(www.posiview.in)
▪ Shweta Shalini, Mentor & Senior Advisor
After a successful stint as a entrepreneur where she founded and scaled up
companies (Fortune Cookie,Real Time Wave), Shweta joined politics and became
Spokesperson for BJP Maharashtra as well as a key person driving BJP’s Social Media
effort. She also plays a key role in the Startup and Innovation arena with her unique
skill sets spanning Corporates, Political, Social and Entrepreneurial Worlds. She will
mentor and guide Posiview Policy Solutions to focus on the right issues and devise
solutions that can be implemented within India’s governance framework.
(www.shwetashalini.com)

12. Disclaimer: Presentation represents personal views of the author and not that of Posiview. It is prepared based on
publicly available data to the best of the author’s knowledge. The author does not take responsibility of the
authenticity, accuracy of the publicly available data. The contents of this presentation are for information purposes
only and the author will not be responsible for any decisions made on the same
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Email : vinit@posiview.in
THANK YOU!

13. “Tough times never last. Tough people do.”
Robert H Schuller
Incubation, Mentoring &
Fund Raising for Startups
Fund Raising for Real Estate &
SME Enterprises
Policy Advisory to Government &
Industry Associations
www.posiview.in / mdoffice@posiview.in / +919130018000